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RULE NO. 424(b)(2)
REGISTRATION NO. 333-20781
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY 6, 1997)
4,000,000 Shares
THE ROUSE COMPANY
Series B Convertible Preferred Stock
(Liquidation Preference $50.00 Per Share)
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Dividends on the shares of Series B Convertible Preferred Stock (the "Series
B Preferred Stock") will be cumulative from the date of original issue and
will be payable quarterly commencing April 1, 1997, in an amount equivalent to
$3.00 per annum per share. See "Description of Series B Preferred Stock--
Dividends."
Shares of Series B Preferred Stock are convertible at any time at the option
of the holders thereof into shares of Common Stock of the Company at a
conversion price of $38.125 per share of Common Stock (equivalent to a
conversion rate of 1.311 shares of Common Stock for each share of Series B
Preferred Stock), subject to adjustment in certain circumstances. See
"Description of Series B Preferred Stock--Conversion Rights." On February 19,
1997, the last reported sale price of the Common Stock on the New York Stock
Exchange (the "NYSE") Composite Tape was $30.50 per share. See "Price Range of
Common Stock and Dividends."
The Series B Preferred Stock is not redeemable prior to April 1, 2000, and
at no time will the Series B Preferred Stock be redeemable for cash. On and
after April 1, 2000, the Series B Preferred Stock will be redeemable, in whole
or in part, at the option of the Company, for such number of shares of Common
Stock as are issuable at a conversion rate of 1.311 shares of Common Stock for
each share of Series B Preferred Stock, subject to adjustment in certain
circumstances. The Company may exercise this option only if for 20 trading
days within any period of 30 consecutive trading days, including the last
trading day of such period, the closing price of the Common Stock on the NYSE
Composite Tape exceeds $45.75 per share, subject to adjustment in certain
circumstances. In order to exercise its redemption option, the Company must
issue a press release announcing the redemption prior to the opening of
business on the second trading day after the conditions in the preceding
sentences have, from time to time, been met. The Series B Preferred Stock will
not be entitled to the benefit of any sinking fund. See "Description of Series
B Preferred Stock--Redemption."
The Series B Preferred Stock has been approved for listing on the NYSE,
subject to official notice of issuance, under the symbol "RSE Pr B."
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SEE "RISK FACTORS" BEGINNING ON PAGE S-5 HEREIN FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY(1)
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<S> <C> <C> <C>
Per Share.............................. $50.00 $1.25 $48.75
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Total(2)............................... $200,000,000 $5,000,000 $195,000,000
</TABLE>
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(1) Before deducting expenses of the offering estimated at $400,000.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
600,000 additional shares of Series B Preferred Stock solely to cover
over-allotments, if any. To the extent the option is exercised, the
Underwriters will offer the additional shares at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$230,000,000, $5,750,000 and $224,250,000, respectively. See
"Underwriting."
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The shares of Series B Preferred Stock are offered by the several
Underwriters, subject to prior sale, when, as and if delivered to and accepted
by them, and subject to the right of the Underwriters to reject any order in
whole or in part. It is expected that delivery of the shares of Series B
Preferred Stock will be made at the offices of Alex. Brown & Sons
Incorporated, Baltimore, Maryland, on or about February 25, 1997.
Alex. Brown & Sons
INCORPORATED
Goldman, Sachs & Co.
Merrill Lynch & Co.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS FEBRUARY 20, 1997.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES OF
SERIES B PREFERRED STOCK OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including notes thereto, and other data included elsewhere or incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus. Unless
otherwise specified, (i) references herein to "Rouse" or "the Company" refer to
The Rouse Company and its consolidated subsidiaries and (ii) information in
this Prospectus Supplement assumes no exercise of the Underwriters' over-
allotment option.
THE COMPANY
The Company is one of the largest publicly-traded (NYSE:RSE) real estate
companies in the United States, with a total stock market capitalization
exceeding $2 billion as of February 19, 1997. The Company develops, acquires,
owns and manages income-producing properties across the United States. At
February 19, 1997, the Company managed a portfolio of operating properties
consisting of retail centers and office, mixed-use and other properties
totaling approximately 59 million square feet in more than 200 buildings. The
Company also develops and sells land almost exclusively related to two large-
scale community development projects, Columbia, Maryland and Las Vegas
(Summerlin), Nevada.
THE OFFERING
Securities Offered.......... 4,000,000 shares of Series B Convertible
Preferred Stock (the "Series B Preferred Stock").
Dividends................... Cumulative at the annual rate of 6.0% per share
on the liquidation preference of the Series B
Preferred Stock payable quarterly, commencing
April 1, 1997. See "Description of Series B
Preferred Stock--Dividends."
Liquidation Preference...... $50.00 per share, plus an amount equal to accrued
and unpaid dividends (whether or not earned or
declared). See "Description of Series B Preferred
Stock--Liquidation Preference."
Conversion Rights........... The Series B Preferred Stock is convertible, in
whole or in part, at the option of the holder at
any time, unless previously redeemed, into shares
of the Company's common stock, par value $0.01
per share (the "Common Stock"), at a conversion
price of $38.125 per share of Common Stock
(equivalent to a conversion rate of 1.311 shares
of Common Stock per share of Series B Preferred
Stock), subject to adjustment in certain
circumstances (the "Conversion Price"). See
"Description of Series B Preferred Stock--
Conversion Rights" and "--Conversion Price
Adjustments."
Redemption at Option of the
Company.................... The Series B Preferred Stock is not redeemable
prior to April 1, 2000, and at no time will the
Series B Preferred Stock be redeemable for cash.
On and after April 1, 2000, the Series B
Preferred Stock will be redeemable by the
Company, in whole or in part, at the option of
the Company, for such number of shares of Common
Stock as are issuable at a conversion rate of
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1.311 shares of Common Stock for each share of
Series B Preferred Stock, subject to adjustment
in certain circumstances. The Company may
exercise this option only if for 20 trading days
within any period of 30 consecutive trading days,
including the last trading day of such period,
the closing price of the Common Stock on the NYSE
exceeds $45.75 per share, subject to adjustment
in certain circumstances. In order to exercise
its redemption option, the Company must issue a
press release announcing the redemption prior to
the opening of business on the second trading day
after the conditions described in the preceding
sentences have, from time to time, been met, but
may not issue any such press release prior to
February 1, 2000. See "Description of Series B
Preferred Stock--Redemption."
Voting Rights............... If dividends on the Series B Preferred Stock or
any series of Preferred Stock ranking on a parity
with the Series B Preferred Stock with respect,
in each case, to the payment of dividends and
amounts upon liquidation, dissolution and winding
up ("Parity Stock") are in arrears for six
quarterly dividend periods, holders of the Series
B Preferred Stock (voting separately as a class
together with holders of shares of any Parity
Stock) will have the right to elect two
additional directors to serve on the Company's
Board of Directors until such dividend arrearage
is eliminated. In addition, certain changes that
would be materially adverse to the rights of
holders of the Series B Preferred Stock or Parity
Stock cannot be made without the affirmative vote
of holders of two-thirds of the shares of
Series B Preferred Stock and the shares of Parity
Stock, voting as a single class, entitled to be
cast thereon. See "Description of Series B
Preferred Stock--Voting Rights."
Ranking..................... The Series B Preferred Stock will rank senior to
the Company's Increasing Rate Cumulative
Preferred Stock, par value $0.01 per share (the
"Increasing Rate Preferred Stock"), if issued,
the Company's 10.25% Junior Preferred Stock, 1996
Series, par value $0.01 per share (the "Junior
Preferred Stock"), and the Common Stock with
respect to the payment of dividends and amounts
upon liquidation, dissolution or winding up. See
"Description of Series B Preferred Stock--
Ranking" and "Description of Common Stock."
NYSE Listing................ The Series B Preferred Stock has been approved
for listing on the NYSE, subject to official
notice of issuance, under the symbol "RSE Pr B."
The shares of Common Stock issuable upon
conversion or redemption of the Series B
Preferred Stock are listed on the NYSE.
Use of Proceeds............. The net proceeds from the Offering will be used
primarily as equity in retail center expansions,
new development projects or acquisition
opportunities and to repay property debt. Any
remaining net proceeds will be used for general
corporate purposes.
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RISK FACTORS
Prospective purchasers of the Series B Preferred Stock should carefully
review the information contained elsewhere or incorporated by reference in
this Prospectus Supplement and the accompanying Prospectus and should
particularly consider the following matters:
REAL ESTATE DEVELOPMENT AND INVESTMENT RISKS
General. 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 or purchasers 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 or sales levels or sustain anticipated lease or
sales 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.
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, and Las Vegas, Nevada. These sales are
affected by the economic climate in Howard County, Maryland, the Baltimore-
Washington area and the greater Las Vegas, Nevada 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, and the greater
Las Vegas, Nevada metropolitan area. Due to the geographic concentration of
this portfolio, the Company's operating results in managing these buildings
and selling property for development depend especially on the local economic
climate and real estate conditions, including the availability of comparable,
competing buildings and properties. See "--Risks Relating to Nevada
Properties."
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 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.
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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
remediation 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. The Company is not
aware of any notification 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
expenditure which would be material to the Company, nor is the Company aware
of any environmental condition with respect to any of its properties that it
believes will involve any such material expenditure. However, there can be no
assurance that any such non-compliance, liability, claim or expenditure will
not arise in the future.
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, and there can be no assurance that the Company will successfully
respond to or manage competitive conditions.
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.
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
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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 counterparties. Although 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, there can be no assurance
that this will not occur.
At September 30, 1996, the Company had outstanding approximately
$450,054,000 aggregate principal amount of variable rate debt (16% of total
debt). Of such variable rate debt, 41% was subject to interest rate cap or
interest rate swap agreements.
RECENT OPERATING RESULTS AND OTHER DATA AND CAPITAL STRUCTURE OF THE COMPANY
The Company incurred net losses per share of Common Stock in 1995 and in
each of the preceding three years, and its combined fixed charges and
Preferred Stock dividend requirements exceeded its earnings in 1995 and in
each of the preceding four years. While net cash provided by the Company's
operating activities has generally been increasing during these periods and
for the nine months ended September 30, 1996, its net earnings (loss) is
affected significantly by noncash charges (primarily depreciation of property,
amortization of deferred costs of projects and net provisions for losses on
dispositions of properties) which reduce reported earnings under generally
accepted accounting principles. In addition, the Company has a relatively high
ratio of debt, including capital leases, to total capital (approximately 90%
on a historical cost basis at September 30, 1996), and a substantial portion
(approximately 72% at September 30, 1996) of the debt consists of fixed rate
nonrecourse loans collateralized by operating properties.
RISKS RELATING TO NEVADA PROPERTIES
General. The Company owns approximately 3.1 million rentable square feet,
the Tournament Players Club golf club at Summerlin and approximately 19,000
acres of development and investment land located in Nevada. These properties
could be adversely affected by the following risks.
Water Availability in the Las Vegas Metropolitan Area. The Las Vegas
metropolitan area is a desert environment where the ability to develop real
estate is largely dependent on the continued availability of water. The Las
Vegas metropolitan area has a limited supply of water to service future
development and it is uncertain whether the metropolitan area will be
successful in obtaining new sources of water. If the Las Vegas metropolitan
area does not obtain new sources of water, development activities could be
materially hindered.
Air Quality. The Las Vegas Valley is classified as a moderate carbon
monoxide and a serious PM-10 nonattainment area by the U.S. Environmental
Protection Agency ("EPA"). The EPA is currently assessing whether the Las
Vegas Valley meets certain regulatory requirements with respect to levels of
ozone. Efforts are underway to develop air quality plans to achieve and
maintain applicable EPA standards. However, there are also ongoing efforts to
relax certain requirements under the Clean Air Act and to modify the EPA's
authority thereunder. The outcome of these efforts may significantly affect
real estate development activities in the Las Vegas Valley.
Availability of Infrastructure. As with most growing communities, the rate
of growth in the Las Vegas metropolitan area is straining the capacity of the
community's infrastructure, particularly with respect to schools, water
delivery systems, transportation, flood control and sewage treatment. Certain
responsible federal, state and local government agencies finance the
construction of infrastructure improvements through a variety of means,
including general obligation bond issues, some of which are subject to voter
approval. The failure of these agencies to obtain financing for or to complete
such infrastructure improvements could materially delay development in the
area or materially increase development costs through the imposition of impact
fees and other fees and taxes, or require the construction or funding of
portions of such infrastructure. The availability of infrastructure or water
has not had a negative impact on the Company's development or investment
activities to date.
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Non-Nevada Gaming. Until this decade, the gaming industry was principally
limited to the traditional markets of Nevada and New Jersey. Several states,
however, have legalized casino gaming and other forms of gambling in recent
years. In addition, several states have negotiated compacts with Indian tribes
pursuant to the Indian Gaming Regulatory Act of 1988 that permit certain forms
of gaming on Indian lands. These additional gaming venues create alternative
destinations for gamblers and tourists who might otherwise have visited Las
Vegas. The Company is not able to determine whether current or future
legalized gaming venues will have an adverse impact on the Las Vegas economy
and thereby adversely affect the Company's properties in the Las Vegas area.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Prospectus Supplement, including the documents incorporated by
reference herein and in the accompanying Prospectus, contain 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 above, 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, which speak only as of the
dates on which they were made. 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. Readers are cautioned not to
place undue reliance on these forward-looking statements. See also
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company--General," "--Operating Results" and "--Financial
Condition, Liquidity and Capital Resources."
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THE COMPANY
The Rouse Company is one of the largest publicly-traded (NYSE, RSE) real
estate companies in the United States, with a total stock market
capitalization exceeding $2 billion as of February 19, 1997. The Company
develops, acquires, owns and manages income-producing properties across the
United States. The Company also develops and sells land almost exclusively
related to two large-scale community development projects located in Columbia,
Maryland and Summerlin, Nevada.
OPERATING PROPERTIES
The Company manages a portfolio of operating properties totaling
approximately 59 million square feet in more than 200 buildings, classified
into two business categories: (i) retail centers and (ii) office, mixed-use
and other properties. The majority of the Company's revenues and Earnings
Before Depreciation and Deferred Taxes ("EBDT") is derived from its retail
centers, particularly those in which the Company has a significant ownership
interest. The 58 retail centers include 42 centers where the Company has
ownership interests ranging from 30% to 100%. In the remaining 16 centers, the
Company's ownership interest is generally 10% or less, and the Company
normally receives fees for management, leasing and development activities and
an incentive participation in the growth of the centers' cash flows and
values. In 1995, 73.1% of total revenues and 87.7% of EBDT, before deducting
development and corporate expenses, were derived from retail centers.
Retail Centers. Major retail properties owned and managed by the Company
include Willowbrook, Woodbridge Center and Paramus Park in New Jersey and
Faneuil Hall Marketplace, South Street Seaport and Harborplace in the
downtowns of Boston, New York and Baltimore, respectively. The Company manages
58 regional retail centers and ten community centers totaling 44,458,000
square feet of space, including 141 department stores and 19,292,000 square
feet of small store gross leasable area. The 58 regional retail centers
include 49 regional malls (16,754,000 square feet of mall space) that
primarily are in the suburbs of major metropolitan areas and typically have
three or more department stores attached, and also include nine specialty
retail centers (1,654,000 square feet) that are in the downtowns of major
cities and do not have department stores attached. Since the department stores
generally own their own space, substantially all of the Company's retail
revenues are generated by the small store mall space, which typically has
occupancy levels (90.6% at December 31, 1996) among the highest in the
industry. The ten community centers total 884,000 square feet and are located
in Columbia, Maryland (9) and Summerlin, Nevada (1).
Office, Mixed-Use and Other Properties. The Company manages more than 100
office/ industrial buildings totaling 14,673,000 square feet (13,372,000
square feet of office/industrial space and 1,301,000 square feet of retail
space in five mixed-use projects). Of this total square footage, 1,858,000
square feet is located in seven buildings which are part of the five major
mixed-use projects (Arizona Center in Phoenix, Westlake Center in Seattle,
Pioneer Place in Portland, and The Gallery at Harborplace and The Village of
Cross Keys, both in Baltimore). These five mixed-use projects include the
1,301,000 square feet of retail space (636,000 square feet of mall store
space). Of the remaining 11,514,000 square feet of office space, 2,452,000
square feet is located in Columbia in projects that are wholly-owned; 728,000
square feet is located in Owings Mills, Maryland in four buildings that are
jointly-owned; 501,000 square feet is located at or near retail centers;
3,225,000 square feet is in the wholly-owned portfolio acquired in the Hughes
transaction (See "Recent Developments"), and is located in Las Vegas
(2,510,000), Summerlin (432,000) or Los Angeles (283,000); and the remaining
4,608,000 square feet is primarily located in the Baltimore-Washington
corridor and is part of a joint venture owned by the Company (5%) and Teachers
Insurance and Annuity Association of America (95%).
The Company owns and manages two hotels, one each in Baltimore and Columbia,
and has an ownership interest in one additional hotel in Baltimore.
LAND SALES
The Company, through its subsidiaries and affiliates, develops and sells
land in and around Columbia, Maryland, which is a new town launched by the
Company in 1962. Today, Columbia has a population of
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nearly 85,000 and is home to 2,500 businesses which employ 60,000 people.
There are presently approximately 2,000 acres of net saleable land available
for residential, commercial and industrial uses. Subsidiaries of the Company
may develop and own certain projects in Columbia, primarily retail centers and
office buildings.
The Company also develops and sells land in and around Las Vegas, Nevada,
primarily in the new community of Summerlin, as a result of the Hughes
acquisition. Summerlin is approximately 15-20 minutes northwest of the Las
Vegas "Strip." It was the best selling new community in the United States in
each year, 1992-1996. Originally 22,510 acres, Summerlin currently has
approximately 16,500 developable acres remaining and a population of 25,000
people out of a projected 160,000 at completion. As in Columbia, the Company
may develop and own certain projects in Summerlin, primarily retail centers
and office buildings.
DEVELOPMENT AND ACQUISITION ACTIVITIES
The majority of the Company's operating properties were developed by the
Company or its subsidiaries. The Company has announced that it is developing a
major new regional shopping center in Orlando, Florida (The Marketplace), and
is expanding numerous existing retail centers: Beachwood Place in Cleveland;
Perimeter Mall in Atlanta; Northwest Arkansas Mall in Fayetteville; Oakwood
Center in suburban New Orleans; Plymouth Meeting in Plymouth Meeting,
Pennsylvania; The Mall in Columbia, in Columbia, Maryland; Augusta Mall in
Augusta, Georgia; Echelon Mall in Voorhees, New Jersey; and Owings Mills in
Baltimore, Maryland. In addition, the Company has recently acquired an
interest in Collin Creek Mall in Plano, Texas and the remaining unowned
partnership interests in Santa Monica Place in Santa Monica, California,
Paramus Park in Paramus, New Jersey, Beachwood Place in Cleveland, Ohio and
Augusta Mall in Augusta, Georgia. The Company is developing three new
community centers, River Hill Village Center in Columbia, Maryland, The
Village Center at The Trails in Summerlin, Nevada and Fairwood Village Center
in Fairwood, Maryland. Also underway is an expansion of the retail space in
the mixed-use project, Pioneer Place, in Portland, Oregon and investigations
regarding additional new retail center development, expansions and potential
acquisitions. Any such new retail center developments, expansions or
acquisitions will be funded using cash generated from operations, from the
issuance of additional equity securities or from the proceeds of any
additional indebtedness.
RECENT DEVELOPMENTS
On June 12, 1996, The Rouse Company completed the acquisition, through
merger, of The Hughes Corporation and Howard Hughes Properties, Limited
Partnership (collectively "Hughes") from the heirs of the late Howard R.
Hughes, Jr.
The Hughes assets include: four large-scale, master-planned business parks
(three in Las Vegas and one in Los Angeles), which include 2,583,000 square
feet of commercial space and approximately 350 acres for future development; a
75 percent partnership interest in an 840,000 square foot premier regional
shopping center, Fashion Show Mall, located on the "Strip" in Las Vegas; a
22,510 acre master-planned, new community development project, Summerlin,
which extends from northwest Las Vegas west to the Spring Mountain Range; and
a number of other land parcels and commercial buildings in both Nevada and the
Los Angeles area.
The purchase price was approximately $533 million, comprised of $178 million
of common stock of the Company (7,742,884 shares valued at $23 per share) and
$355 million of debt and other liabilities (net of certain receivables and
other assets acquired) incurred or assumed by the Company. Additional shares
of common stock of the Company may be issued to the Hughes heirs based on the
values of certain specified assets at various "termination" dates over a 14-
year period and net cash flows generated from the development or sale of those
assets prior to the termination dates.
S-10
<PAGE>
PROJECTS OF THE COMPANY
The following table sets forth information with respect to the Company's (i)
regional retail centers in operation, (ii) community centers in operation,
(iii) regional retail centers under construction or in development, (iv)
community centers under construction or in development, (v) mixed-use projects
retail space in operation, (vi) mixed-use project retail space under
construction or in development, (vii) mixed-use projects office space in
operation, (viii) hotel projects in operation, (ix) Columbia office projects
in operation, (x) Hughes commercial properties in operation, (xi) Hughes
properties under construction or in development, (xii) other office projects
in operation, (xiii) office projects owned by Rouse-Teachers Properties, Inc.
and (xiv) industrial projects owned by Rouse-Teachers Properties, Inc.
RETAIL CENTERS
<TABLE>
<CAPTION>
RETAIL SQUARE FOOTAGE
DATE OF ---------------------
REGIONAL OPENING OR TOTAL MALL
RETAIL CENTERS IN OPERATION ACQUISITION DEPARTMENT STORES CENTER ONLY
- --------------------------- ----------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
Almeda Mall,
Houston, TX(a)......... 10/68 Foley's; JCPenney 802,000 294,000
Augusta Mall,
Augusta, GA(a)......... 8/78 Rich's; R.H. Macy; JCPenney; 902,000 313,000
Sears
Bayside Marketplace,
Miami, FL(b)........... 4/87 -- 223,000 223,000
Beachwood Place,
Cleveland, OH(a)....... 8/78 Saks Fifth Avenue; Dillard's 453,000 228,000
Burlington Center,
Burlington, NJ(d)...... 8/82 Strawbridge & Clothier; Sears, 669,000 246,000
JCPenney
Cherry Hill,
Cherry Hill, NJ(a)..... 10/61 Strawbridge & Clothier; R.H. 1,285,000 544,000
Macy; JCPenney
The Citadel,
Colorado Springs,
CO(d).................. 8/80 Mervyn's; JCPenney; Foley's; 1,128,000 460,000
Dillard's
College Square,
Cedar Falls, IA(d)..... 8/80 Von Maur; Younkers; Wal-Mart 560,000 313,000
Collin Creek Mall,
Plano, TX(b)........... 9/95 Dillard's; Foley's; Sears; 1,123,000 333,000
JCPenney; Mervyn's
The Mall in Columbia,
Columbia, MD(a)........ 8/71 Hecht's; Sears; JCPenney 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; 1,065,000 481,000
JCPenney; Boscov's
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 Show Mall,
Las Vegas, NV(b)....... 6/96 R.H. Macy; Dillard's; Neiman- 840,000 308,000
Marcus; Saks Fifth Avenue;
Robinson's-May
</TABLE>
S-11
<PAGE>
<TABLE>
<CAPTION>
RETAIL SQUARE FOOTAGE
DATE OF ---------------------
REGIONAL OPENING OR TOTAL MALL
RETAIL CENTERS IN OPERATION ACQUISITION DEPARTMENT STORES CENTER ONLY
- --------------------------- ----------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
Franklin Park,
Toledo, OH (b)......... 7/71 Hudson's; JCPenney; Jacobson's; 1,082,000 313,000
Lion
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; 1,031,000 340,000
The Grand Avenue, Dillard's
Milwaukee, WI (a)...... 8/82 Marshall Field; The Boston 842,000 242,000
Greengate Mall, Store
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 (a)......... 8/71 Dillard's; JCPenney; Foley's 1,099,000 367,000
Hulen Mall,
Ft. Worth, TX (a)...... 8/77 Foley's; Montgomery Ward; 924,000 327,000
Dillard's
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; Stage; Younkers; 340,000 141,000
Menard's
Midtown Square,
Charlotte, NC (a)...... 10/59 Burlington Coat Factory 235,000 190,000
Mondawmin (a)/Metro
Plaza, 1/78; --
Baltimore, MD (b)...... 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
North Star,
San Antonio, TX (b).... 9/60 Dillard's; Foley's; Saks Fifth 1,288,000 487,000
Avenue; Marshall Field; Mervyn's
Northwest Arkansas Mall,
Fayetteville, AR (d)... 8/80 JCPenney; Sears; Dillard's 814,000 242,000
Northwest Mall,
Houston, TX (a)........ 10/68 Foley's; JCPenney 800,000 292,000
Oakwood Center,
Gretna, LA (a)......... 10/82 Sears; Dillards; Mervyn's; 960,000 362,000
Maison Blanche
Owings Mills,
Baltimore, MD (a)...... 7/86 R.H. Macy; Hecht's 809,000 325,000
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
RETAIL SQUARE FOOTAGE
DATE OF ---------------------
REGIONAL OPENING OR TOTAL MALL
RETAIL CENTERS IN OPERATION ACQUISITION DEPARTMENT STORES CENTER ONLY
- --------------------------- ----------- ----------------- ---------- ----------
<S> <C> <C> <C> <C>
Paramus Park,
Paramus, NJ (a).......... 3/74 Sears; R.H. Macy 755,000 279,000
Perimeter Mall,
Atlanta, GA (b).......... 8/71 Rich's; JCPenney; R.H. Macy 1,224,000 444,000
Plymouth Meeting,
Plymouth Meeting, PA
(a)...................... 2/66 Strawbridge & Clothier; 784,000 415,000
Boscov's
Randhurst,
Mt. Prospect, IL (d)..... 7/81 Carson, Pirie, Scott; JCPenney; 1,324,000 591,000
Ridgedale Center, Montgomery Ward; Kohls
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 Center,
Salem, OR (d)............ 6/90 Meier & Frank; JCPenney; 649,000 211,000
Mervyn's; Nordstrom
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
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
Tampa Bay Center,
Tampa, FL (b)............ 8/76 Burdine's; Sears; Montgomery 883,000 325,000
Town and Country Center, Ward
Miami, FL (c)............ 2/88 Sears; Marshalls; Mervyn's 645,000 467,000
Underground Atlanta,
Atlanta, GA (c).......... 6/89 -- 219,000 219,000
Westland Mall,
West Burlington, IA (d).. 8/80 JCPenney; Younkers 344,000 175,000
White Marsh,
Baltimore, MD (a)........ 8/81 R.H. Macy; Sears; JCPenney; 1,178,000 359,000
Willowbrook, Hecht's
Wayne, NJ (b)............ 9/69 R.H. Macy; Sears; Stern's 1,499,000 485,000
Woodbridge Center,
Woodbridge, NJ (a)....... 3/71 JCPenney; Sears; Stern's; 1,544,000 560,000
Fortunoff ---------- ----------
Total Regional Retail
Centers in Operation... 43,574,000 18,408,000
========== ==========
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
SQUARE
COMMUNITY CENTERS IN OPERATION LOCATION FOOTAGE
------------------------------ ------------- ----------
<S> <C> <C> <C> <C>
Dobbin Center(b)............... Columbia, MD 219,000
Dorsey Search Village
Center(a)..................... Columbia, MD 86,000
Gateway Plaza(a)............... Columbia, MD 24,000
Harper's Choice Village
Center(a)..................... Columbia, MD 81,000
Hickory Ridge Village
Center(a)..................... Columbia, MD 97,000
King's Contrivance Village
Center(a)..................... Columbia, MD 107,000
Long Reach Village Center(a)... Columbia, MD 77,000
Oakland Mills Village
Center(a)..................... Columbia, MD 62,000
Wilde Lake Village Center(a)... Columbia, MD 95,000
The Pueblo at Summerlin(b)..... Summerlin, NV 36,000
---------- ----------
Total Community Centers in
Operation..................... 884,000 884,000
---------- ----------
Total Retail Centers in
Operation..................... 44,458,000* 19,292,000*
========== ==========
</TABLE>
- --------
* Does not include 1,301,000 and 636,000 square feet, respectively of retail
space included in mixed-used projects (see following section).
<TABLE>
<CAPTION>
RETAIL SQUARE FOOTAGE
---------------------
REGIONAL RETAIL CENTERS UNDER TOTAL MALL
CONSTRUCTION OR IN DEVELOPMENT DEPARTMENT STORES CENTER ONLY
------------------------------ ------------------ ----------- ---------
<S> <C> <C> <C>
The Marketplace at Oviedo Crossing,
Orlando, FL............................ Dillard's; Gayfers 700,000 300,000
Beachwood Place Expansion, Cleveland,
OH..................................... Nordstrom 462,000 120,000
Northwest Arkansas Mall Expansion,
Fayetteville, AR....................... -- 35,000 35,000
Oakwood Center Expansion, Gretna, LA.... JCPenney 125,000 --
Plymouth Meeting Expansion, Plymouth
Meeting, PA............................ United Artists 48,000 48,000
Perimeter Mall Expansion, Atlanta, GA... Nordstrom 240,000 15,000
The Mall In Columbia Expansion,
Columbia, MD........................... Nordstrom 220,000 50,000
Augusta Mall Expansion, Augusta, GA..... JB White 160,000 --
Echelon Mall Expansion, Vorhees, NJ..... Sears 140,000 --
Owings Mills Expansion, Baltimore, MD... Sears 120,000 --
----------- ---------
Total Regional Retail Centers Under
Construction or in Development....... 2,250,000 568,000
----------- ---------
</TABLE>
<TABLE>
<CAPTION>
COMMUNITY CENTERS UNDER
CONSTRUCTION OR IN DEVELOPMENT
------------------------------
<S> <C> <C>
River Hill Village Center, Columbia, MD(b)..................... 94,000 94,000
The Village Center at The Trails, Las Vegas, NV(a)............. 175,000 175,000
Fairwood Village Center, Fairwood, MD(a)....................... 80,000 80,000
--------- -------
Total Retail Centers Under Construction or in Development.... 2,599,000 917,000
========= =======
</TABLE>
OFFICE, MIXED-USE AND OTHER PROPERTIES
<TABLE>
<CAPTION>
RETAIL SQUARE FOOTAGE
---------------------
MIXED-USE PROJECTS TOTAL MALL
RETAIL SPACE IN OPERATION CENTER ONLY
------------------------- ----------- ---------
<S> <C> <C>
The Shops at Arizona Center, Phoenix, AZ(a)................. 151,000 151,000
The Gallery At Harborplace, Baltimore, MD(a)................ 139,000 139,000
Pioneer Place, Portland, OR(a).............................. 220,000 160,000
Village of Cross Keys, Baltimore, MD(a)..................... 68,000 68,000
Westlake Center, Seattle, WA(b)............................. 723,000 118,000
----------- ---------
Total Mixed-Use Project Retail Space in Operation......... 1,301,000 636,000
=========== =========
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
MIXED-USE PROJECT RETAIL SQUARE FOOTAGE
RETAIL SPACE ---------------------
UNDER CONSTRUCTION OR TOTAL MALL
IN DEVELOPMENT CENTER ONLY
--------------------- ------ ----------
<S> <C> <C>
Pioneer Place Expansion, Portland, OR.................... 150,000 150,000
========== ==========
</TABLE>
<TABLE>
<CAPTION>
MIXED-USE PROJECTS
OFFICE SPACE
IN OPERATION SQUARE FOOTAGE
------------------ --------------
<S> <C>
One Arizona Center, Phoenix, AZ (a)............................. 330,000
Two Arizona Center, Phoenix, AZ (a)............................. 449,000
Legg Mason Tower, Baltimore, MD (a)............................. 265,000
Pioneer Place, Portland, OR (a)................................. 283,000
Quadrangle at Cross Keys, Baltimore, MD (a)..................... 110,000
Village Square at Cross Keys, Baltimore, MD (a)................. 79,000
Westlake Center, Seattle, WA (b)................................ 342,000
---------
Total Mixed-Use Projects Office Space in Operation............ 1,858,000
=========
</TABLE>
<TABLE>
<CAPTION>
HOTEL PROJECTS IN OPERATION LOCATION ROOMS
--------------------------- ------------- -----
<S> <C> <C>
Cross Keys Inn (a)....................................... Baltimore, MD 148
Renaissance Hotel........................................ Baltimore, MD 622
Columbia Inn (a)......................................... Columbia, MD 289
</TABLE>
<TABLE>
<CAPTION>
COLUMBIA OFFICE PROJECTS IN OPERATION TYPE OF PROJECT SQUARE FEET
------------------------------------- --------------- -----------
<S> <C> <C>
10 Corporate Center (a)........................... Office 89,000
20 Corporate Center (a)........................... Office 105,000
30 Corporate Center (a)........................... Office 134,000
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 112,000
RWD Building (a).................................. Office 137,000
Re/Max Building (a)............................... Office 39,000
Reliance Building (a)............................. Office 38,000
The Ryland Group Headquarters (a)................. Office 167,000
Oakland Building (a).............................. R&D/Industrial 145,000
Gateway Commerce Center 2 & 20 (a)................ Industrial 1,291,000
---------
Total Columbia Office Projects in Operation..... 2,452,000
=========
</TABLE>
S-15
<PAGE>
<TABLE>
<CAPTION>
HUGHES COMMERCIAL PROPERTIES
IN OPERATION LOCATION SQUARE FOOTAGE
---------------------------- ------------- --------------
<S> <C> <C>
HUGHES CENTER
3720 Howard Hughes Parkway (a)..................... Las Vegas, NV 38,000
3753-63 Howard Hughes Parkway (a).................. Las Vegas, NV 121,000
3770 Howard Hughes Parkway (b)..................... Las Vegas, NV 64,000
3773 Howard Hughes Parkway (a)..................... Las Vegas, NV 165,000
3800 Howard Hughes Parkway (a)..................... Las Vegas, NV 259,000
3930 Howard Hughes Parkway (b)..................... Las Vegas, NV 86,000
Nicky Blair's (a).................................. Las Vegas, NV 10,000
Fog City Diner (a)................................. Las Vegas, NV 6,000
Cozymel's (a)...................................... Las Vegas, NV 9,000
Prime Rib (a)...................................... Las Vegas, NV 16,000
---------
774,000
=========
HUGHES AIRPORT CENTER
955 Grier Drive (a)................................ Las Vegas, NV 46,000
901 Grier Drive (a)................................ Las Vegas, NV 31,000
3871 Grier Drive (a)............................... Las Vegas, NV 53,000
6700 S. Paradise (a)............................... Las Vegas, NV 53,000
6A 1111 Grier Drive (a)............................ Las Vegas, NV 29,000
6B 1181 Grier Drive (a)............................ Las Vegas, NV 65,000
1151 Grier Drive (a)............................... Las Vegas, NV 102,000
950 Grier Drive (a)................................ Las Vegas, NV 27,000
900 Grier Drive (a)................................ Las Vegas, NV 11,000
955 Kelly Johnson Drive (a)........................ Las Vegas, NV 11,000
950 Pilot Road (a)................................. Las Vegas, NV 84,000
890 Pilot Road (a)................................. Las Vegas, NV 88,000
6590 Bermuda Road (a).............................. Las Vegas, NV 133,000
6600 Bermuda Road (a).............................. Las Vegas, NV 33,000
839 Pilot Road (a)................................. Las Vegas, NV 47,000
815 Pilot Road (a)................................. Las Vegas, NV 55,000
831 Pilot Road (a)................................. Las Vegas, NV 35,000
823 Pilot Road (a)................................. Las Vegas, NV 63,000
731 Pilot Road (a)................................. Las Vegas, NV 65,000
751 Pilot Road (a)................................. Las Vegas, NV 47,000
711 Pilot Road (a)................................. Las Vegas, NV 76,000
500 Pilot Road (a)................................. Las Vegas, NV 34,000
420 Pilot Road (a)................................. Las Vegas, NV 52,000
EG&G 821 Grier Drive (a)........................... Las Vegas, NV 45,000
Lockheed 975 Kelly Johnson Drive (a)............... Las Vegas, NV 33,000
Lockheed 980 Kelly Johnson Drive (a)............... Las Vegas, NV 54,000
Montgomery Ward Credit (a)......................... Las Vegas, NV 81,000
---------
1,453,000
=========
HUGHES CHEYENNE CENTER
Lechter's, Inc. (a)................................ Las Vegas, NV 155,000
Trade Drive (a).................................... Las Vegas, NV 112,000
---------
267,000
=========
</TABLE>
S-16
<PAGE>
<TABLE>
<CAPTION>
HUGHES COMMERCIAL PROPERTIES
IN OPERATION LOCATION SQUARE FOOTAGE
---------------------------- ---------------- --------------
<S> <C> <C>
SUMMERLIN
Pueblo Medical Center (a)........................ Summerlin, NV 30,000
1551 Hillshire (a)............................... Summerlin, NV 69,000
Plaza East (a)................................... Summerlin, NV 49,000
Plaza West (a)................................... Summerlin, NV 38,000
1201-41 Town Center Drive (a).................... Summerlin, NV 74,000
1251-81 Town Center Drive (a).................... Summerlin, NV 54,000
9950-80 Covington Cross Drive (a)................ Summerlin, NV 61,000
Williams Sonoma (a).............................. Summerlin, NV 36,000
1251 Center Crossing Drive (a)................... Summerlin, NV 21,000
-----------
432,000
-----------
OTHER
North Las Vegas DMV (a).......................... Las Vegas, NV 16,000
6601 Center Drive West (a)....................... Los Angeles, CA 104,000
Spectrum Club (a)................................ Los Angeles, CA 37,000
-----------
157,000
-----------
LUCKY'S CENTER
PruCare (a)...................................... Los Angeles, CA 24,000
Lucky's (a)...................................... Los Angeles, CA 113,000
Denny's (a)...................................... Los Angeles, CA 5,000
-----------
142,000
-----------
Total Hughes Properties in Operation........... 3,225,000
===========
HUGHES PROPERTIES UNDER CONSTRUCTION OR IN
DEVELOPMENT LOCATION SQUARE FEET
------------------------------------------ ---------------- -----------
Gordon Biersch Brewing Co. ...................... Las Vegas, NV 13,000
3980 Howard Hughes Parkway....................... Las Vegas, NV 86,000
Sprint Cellular.................................. Las Vegas, NV 60,000
600 Pilot Road................................... Las Vegas, NV 38,000
680 Pilot Road................................... Las Vegas, NV 51,000
Equinox International............................ Las Vegas, NV 110,000
Canyons Center................................... Summerlin, NV 104,000
Equinox International............................ Summerlin, NV 75,000
-----------
Total Hughes Properties Under Construction or
in Development................................ 537,000
===========
<CAPTION>
OTHER OFFICE PROJECTS IN OPERATION LOCATION SQUARE FEET
---------------------------------- ---------------- --------------
<S> <C> <C>
300 East Lombard (c)............................. Baltimore, MD 233,000
Schilling Center (a)............................. Hunt Valley, MD 55,000
Alexander & Alexander Building I (b)............. Owings Mills, MD 143,000
Alexander & Alexander Building II (b)............ Owings Mills, MD 198,000
Blue Cross & Blue Shield Building I (b).......... Owings Mills, MD 270,000
Blue Cross & Blue Shield Building II (b)......... Owings Mills, MD 117,000
First National Bank Plaza (a).................... Mt. Prospect, IL 66,000
Faneuil Hall Marketplace (a)..................... Boston, MA 147,000
-----------
Total Other Office Projects in Operation....... 1,229,000
===========
</TABLE>
S-17
<PAGE>
<TABLE>
<CAPTION>
OFFICE PROJECTS OWNED BY ROUSE-
TEACHERS PROPERTIES, INC. LOCATION SQUARE FEET
------------------------------- -------------------------- -----------
<S> <C> <C>
Triangle Business Center (c).............. Baltimore, MD 75,000
Owen Brown I (c).......................... Columbia, MD 46,000
Sieling Tech Center (c)................... Columbia, MD 76,000
RiversPark I and II (c)................... Columbia, MD 306,000
Center Pointe (c)......................... Hunt Valley, MD 130,000
201 International Circle (c).............. Hunt Valley, MD 79,000
Loveton Center 9 (c)...................... Hunt Valley, MD 53,000
11011 McCormick Road (c).................. Hunt Valley, MD 57,000
Schilling Plaza North (c)................. Hunt Valley, MD 99,000
Schilling Plaza South (c)................. Hunt Valley, MD 108,000
One Hunt Valley (c)....................... Hunt Valley, MD 215,000
Inglewood Office Centres 1, 2 (c)......... Prince George's County, MD 222,000
Inglewood Tech Centers I, II, III, IV & V
(c)...................................... Prince George's County, MD 316,000
Silver Spring Metro Plaza (c)............. Silver Spring, MD 690,000
Ambassador Center (c)..................... Woodlawn, MD 83,000
15-17 Governor's Court (c)................ Woodlawn, MD 29,000
21 Governor's Court (c)................... Woodlawn, MD 56,000
Parkview Center (c)....................... Woodlawn, MD 58,000
Senate Plaza (c).......................... Camp Hill, PA 231,000
----------
Total Office Projects Owned by Rouse-
Teachers Properties, Inc............... 2,929,000
==========
<CAPTION>
INDUSTRIAL PROJECTS OWNED BY ROUSE-
TEACHERS PROPERTIES, INC. LOCATION SQUARE FEET
----------------------------------- -------------------------- -----------
<S> <C> <C>
Pulaski Industrial Park (c)............... Essex, MD 157,000
Hunt Valley Business Center (c)........... Hunt Valley, MD 950,000
Rutherford Business Center (c)............ Woodlawn, MD 572,000
----------
Total Industrial Projects Owned by
Rouse-Teachers
Properties, Inc........................ 1,679,000
----------
Total Office and Industrial Space in
Operation.............................. 13,372,000
==========
</TABLE>
- --------
(a) Projects are wholly owned by subsidiaries of the Company.
(b) Projects are owned by joint ventures or partnerships and are managed by
subsidiaries of the Company for a fee. The Company's ownership interest,
through its subsidiaries, is at least 50% (except for North Star and
Willowbrook in which the Company has 37 1/2% interests and Collin Creek
Mall 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.
S-18
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is traded on the NYSE under the symbol "RSE." The following
table sets forth, for the periods indicated, the range of high and low per
share sales prices for Common Stock as reported on the NYSE Composite Tape
(and for periods prior to November 9, 1995, the Nasdaq National Market System)
and dividends paid per share of Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------
DIVIDENDS PER
HIGH LOW SHARE
------- ------- -------------
<S> <C> <C> <C>
1994
First Quarter............................... $19 $16 1/4 $.17
Second Quarter.............................. 20 18 .17
Third Quarter............................... 20 18 3/4 .17
Fourth Quarter.............................. 19 1/2 17 1/4 .17
1995
First Quarter............................... 19 7/8 18 1/2 .20
Second Quarter.............................. 20 17 5/8 .20
Third Quarter............................... 22 5/8 19 1/2 .20
Fourth Quarter.............................. 22 1/8 18 5/8 .20
1996
First Quarter............................... 22 1/8 18 1/4 .22
Second Quarter.............................. 27 3/8 20 3/8 .22
Third Quarter............................... 26 1/4 24 3/8 .22
Fourth Quarter.............................. 32 1/4 25 .22
1997
First Quarter (through February 19, 1997)... 32 29 1/4 --
</TABLE>
On February 19, 1997, the last reported sales price of the Common Stock, as
reported on the NYSE Composite Tape, was $30.50.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Series B
Preferred Stock are estimated to be approximately $195 million ($224 million,
if the Underwriters exercise the over-allotment option in full). The net
proceeds will be used primarily as equity in retail center expansions, new
development projects or acquisition opportunities and to repay property debt.
Any remaining net proceeds will be used for general corporate purposes. On an
interim basis, the net proceeds will be used to retire or reduce the Company's
outstanding lines of credit and property debt.
S-19
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
and its consolidated subsidiaries at September 30, 1996 and as adjusted to
give effect to (i) the sale of the Series B Preferred Stock offered hereby and
(ii) the application of the net proceeds therefrom:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of debt and capital lease obligations.. $ 123,837 $ 122,906
========== ==========
Long-term debt......................................... $2,745,405 $2,551,736
Long-term portion of capital lease obligations......... 57,426 57,426
Company-obligated mandatorily redeemable preferred
securities of a Trust holding solely Company
Subordinated Debt Securities.......................... 137,500 137,500
Shareholders' equity:
Preferred stock, par value $.01 per share; 50,000,000
shares authorized; 4,000,000 shares of Series B
Convertible Preferred stock, par value $.01
per share, issued and outstanding (as adjusted)...... -- 40
Common stock, par value $.01 per share; 250,000,000
shares authorized; 66,692,721 shares issued and
outstanding.......................................... 667 667
Additional paid-in capital............................ 490,160 684,720
Accumulated deficit................................... (304,882) (304,882)
---------- ----------
Total shareholders' equity........................... 185,945 380,545
---------- ----------
Total capitalization............................... $3,126,276 $3,127,207
========== ==========
</TABLE>
S-20
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial information of the Company for the years
ended December 31, 1995, 1994 and 1993 and the nine months ended September 30,
1996 and 1995 was derived from the Company's consolidated financial statements
and five-year comparison of selected financial data contained in its Annual
Report on Form 10-K for the year ended December 31, 1995 and its Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996 and is qualified
in its entirety by reference to such documents. See "Incorporation of Certain
Documents by Reference" in the accompanying Prospectus. The selected financial
information of the Company as of December 31, 1993, 1992 and 1991 and for the
years ended December 31, 1992 and 1991 was derived from the audited
consolidated financial statements of the Company for such periods, and the
balance sheet information for the quarter ended September 30, 1995 was derived
from the unaudited consolidated financial statements of the Company for such
period which, in each case, have not been incorporated herein by reference.
Results for the nine months ended September 30, 1996 and 1995 are unaudited.
Results for the nine months ended September 30, 1996 are not necessarily
indicative of results for the year ended December 31, 1996. The following
financial information should be read in conjunction with the Company's
consolidated financial statements and notes thereto contained in the Annual
Report on Form 10-K and the Quarterly Reports on Form 10-Q incorporated by
reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS DATA:
Revenues from
continuing
operations............ $ 579,873 $ 495,316 $ 672,821 $ 671,171 $ 646,805 $ 597,105 $ 573,498
Earnings (loss) from
continuing
operations............ 10,595 3,939 5,850 6,606 (1,291) (15,849) 2,424
Earnings (loss) from
continuing operations
applicable to common
shareholders per share
of common stock....... -- (.15) (.18) (.14) (.27) (.33) .05
BALANCE SHEET DATA:
Total assets-cost
basis................. 3,615,925 2,929,637 2,985,609 2,915,860 2,874,982 2,726,281 2,637,452
Total assets-current
value basis(1)........ -- -- 4,852,403 4,736,961 4,588,636 4,217,819 4,174,093
Debt and capital
leases................ 2,926,668 2,617,637 2,538,315 2,532,920 2,473,596 2,498,983 2,374,527
Shareholders' equity
(deficit):
Historical cost basis. 185,945 54,483 42,584 95,026 113,151 (34,848) 17,328
Current value
basis(1).............. -- -- 1,539,155 1,614,245 1,525,606 1,188,896 1,274,070
Shareholders' equity
(deficit) per share of
common stock:
Historical cost basis.. 2.79 .93 .73 1.63 1.98 (.74) .36
Current value
basis(1).............. -- -- 26.30 27.75 26.75 25.50 26.60
OTHER SELECTED DATA:
Earnings before
depreciation and
deferred taxes from
operations (EBDT)(2).. 93,487 76,978 108,360 94,710 78,281 52,282 46,820
Net cash provided by
(used in):
Operating activities... 91,064 69,525 107,001 113,775 101,149 66,630 67,226
Investing activities... (110,685) (64,087) (64,995) (178,551) (154,446) (144,836) (96,210)
Financing activities... (17,538) (28,633) 3,518 40,618 47,068 98,914 17,271
Ratio of earnings to
fixed charges(3)(4)... 1.14 1.05 1.04 1.06 1.01 -- --
Ratio of earnings to
combined fixed charges
and Preferred stock
dividend
requirements(5)(6).... 1.04 -- -- -- -- -- --
Cash dividends per
share of common stock
for the period........ .66 .60 .80 .68 .62 .60 .60
Cash dividends per
share of convertible
Preferred stock for
the period............ 2.43 2.43 3.25 3.25 2.83 -- --
Market price per share
of common stock at end
of period(7).......... 26.00 22.00 20.13 19.25 17.75 18.00 18.25
Weighted average common
shares outstanding.... 51,760 47,779 47,814 47,565 47,411 47,994 48,157
Number of common shares
outstanding at end of
period................ 66,692 47,921 47,923 47,571 47,562 47,292 48,193
Number of convertible
Preferred stock shares
outstanding at end of
period................ -- 4,505 4,505 4,505 4,025 -- --
</TABLE>
S-21
<PAGE>
- --------
(1) For periods prior to the nine months ended September 30, 1996, 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 Company's Series A Convertible Preferred stock. All
of the outstanding shares of Series A Convertible Preferred stock were
converted into common stock on September 30, 1996. Current value basis
financial information is not presented for interim periods.
(2) 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.
(3) The ratio of earnings to fixed charges is computed by dividing fixed
charges into net earnings (loss) before income taxes, extraordinary loss
and cumulative effect of change in accounting principle, adjusted for
minority interest in earnings, amortization of interest costs previously
capitalized and certain other items, plus fixed charges other than
capitalized interest. Fixed charges include interest costs, the estimated
interest component of rent expense and certain other items.
(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.
(5) The ratio of earnings to combined fixed charges and Preferred stock
dividend requirements is computed by dividing total combined fixed charges
and amounts of pre-tax earnings required to cover Preferred stock dividend
requirements into net earnings (loss) before income taxes, extraordinary
loss and cumulative effect of change in accounting principle, adjusted for
minority interest in earnings, amortization of interest costs previously
capitalized and certain other items, plus fixed charges other than
capitalized interest. Fixed charges include interest costs, the estimated
interest component of rent expense and certain other items.
(6) 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 $9,597,000 for the nine months
ended September 30, 1995, and 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.
(7) The market price of the Common Stock as of the close of business on
February 19, 1997 was $30.50 per share.
S-22
<PAGE>
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, and Las Vegas (Summerlin), Nevada.
Management believes that the Company's financial position is sound and that
its liquidity and capital resources are adequate. The Company has continued to
achieve strong financial results in recent periods, despite the generally
difficult environment for retail businesses. 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.
On June 12, 1996, the Company purchased all of the outstanding equity
interests in The Hughes Corporation and its affiliated partnership, Howard
Hughes Properties, Limited Partnership (together, "Hughes"). The assets of
Hughes consist primarily of a regional shopping center and a large-scale,
master-planned community (Summerlin) in Las Vegas, Nevada, and four large-
scale, master-planned business parks and various other properties in Nevada
and Southern California. Management believes that the acquisition of Hughes
will enable the Company to capitalize on its existing strengths in retail and
office/mixed-use projects and large scale land development projects in the
fast-growing Las Vegas market. For additional information about the
acquisition of Hughes, see note 2 to the Company's consolidated financial
statements contained in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 incorporated by reference herein.
Management is continually reviewing and evaluating the portfolio of
properties to identify expansion, renovation and/or remerchandising
opportunities and properties that may not have future prospects consistent
with the Company's long-term objectives. The Company will continue to
selectively dispose of properties that do not appear to have future prospects
consistent with the Company's objective, primarily 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.
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
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 Company's consolidated financial statements for the
years ended December 31, 1995, 1994 and 1993 incorporated by reference into
this Prospectus Supplement and accompanying Prospectus 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).
S-23
<PAGE>
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 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
S-24
<PAGE>
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.
Land Sales. 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.
S-25
<PAGE>
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
Company's consolidated financial statements incorporated by reference into
this Prospectus Supplement and the accompanying Prospectus 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. Approximately $9,000,000 of the provision
for loss on the litigation judgment referred to above was reversed in the
third quarter of 1996. See "Three and Nine Months Ended September 30, 1996 and
1995--Operating Results--Gain (Loss) on Dispositions of Assets and Other
Provisions, Net" below.
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
S-26
<PAGE>
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 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.
YEARS ENDED DECEMBER 31, 1995 AND 1994
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 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
S-27
<PAGE>
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 refinanced the mortgage on a long-term basis 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 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.
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.
S-28
<PAGE>
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
OPERATING RESULTS
Operating Properties. Revenues from retail centers increased $4,692,000 and
$9,148,000 for the three and nine months ended September 30, 1996, as compared
to the same periods in 1995. Total operating and interest expenses increased
$6,837,000 and $11,077,000, including increased depreciation and amortization
of $2,546,000 and $3,882,000, respectively, for the three and nine months
ended September 30, 1996 as compared to the same periods in 1995. The
increases in revenues and expenses for these periods are attributable
primarily to the net effect of changes in the Company's portfolio of retail
centers, including acquisitions of interests in four properties (two in the
third quarter of 1995, one in connection with the acquisition of Hughes in the
second quarter of 1996 and one in the third quarter of 1996), the opening of
an expansion in the first quarter of 1995 and sales of two properties in the
first quarter of 1996. Increases in effective rents on re-leased space,
particularly in the Company's larger centers in larger trade areas, also
contributed to the increases in revenues for these periods. The increases in
revenues for the periods were partially offset by the effects of slightly
lower overall average occupancy levels (88.2% and 88.3%, respectively, for the
three and nine months ended September 30, 1996, as compared to 91.0% and
90.6%, respectively, for the same periods in 1995) and decreases in lease
cancellation payments.
Revenues from office, mixed-use and other properties increased $14,680,000
and $18,654,000 for the three and nine months ended September 30, 1996, as
compared to the same periods in 1995. These increases are due primarily to the
acquisition of Hughes. Improved occupancy levels at hotel and office
properties contributed to the increases in each period; however, the increase
for the nine months ended September 30, 1996, was partially offset by a
decrease in lease termination payments from tenant restructurings. Total
operating and interest expenses increased $13,888,000 and $13,676,000 for the
three and nine months ended September 30, 1996, as compared to the same
periods in 1995. These increases are also attributable primarily to the
acquisition of Hughes and were partially offset by the effects of a sale of an
unoccupied industrial building in the second quarter of 1996.
Land Sales. Revenues from land sales, excluding sales of land acquired in
the purchase of Hughes, decreased $3,630,000 and increased $6,627,000, and
related costs and expenses decreased $1,697,000 and increased $3,033,000, for
the three and nine months ended September 30, 1996 as compared to the same
periods in 1995. The decrease in revenues for the three month period is
attributable to lower levels of land sales in Columbia, particularly for
residential use. The increase in revenues for the nine month period is
attributable to higher levels of land sales in Columbia, particularly for
commercial use. The changes in related costs and expenses are attributable
primarily to changes in the cost of sales.
Revenues from sales of land acquired in the purchase of Hughes were
$42,495,000 and $49,670,000, and related costs and expenses were $37,454,000
and $44,295,000, for the three and nine months ended September 30, 1996. The
cost of sales for land acquired in the purchase of Hughes for the periods is
relatively high as a percentage of revenues as the land sold consists
primarily of inventory on which development was completed or in progress at
the date of acquisition. Cost of sales for land acquired in the purchase of
Hughes is expected to be lower as a percentage of revenues in future periods
as the inventory of land on which development was completed or in progress at
the date of acquisition is depleted.
Development. 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 which may not go forward to
completion. New business costs relate primarily to the initial evaluation of
acquisition and development opportunities. These costs increased and decreased
$1,414,000 and $394,000 for the three and nine months ended September 30, 1996
as compared to the same periods in 1995. The increase in the three month
period is attributable primarily to an increase in additions to the pre-
construction reserve
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due to the Company's more active pursuit of retail center development
opportunities. The decrease in the nine month period is due primarily to
reduced new business costs as the Company's focus on the acquisition of Hughes
deferred evaluation of other opportunities, particularly during the first half
of 1996.
Corporate. Corporate interest costs were $4,380,000 and $3,275,000 for the
three months ended September 30, 1996 and 1995, respectively, and $13,620,000
and $10,479,000 for the nine months ended September 30, 1996 and 1995,
respectively. Of such amounts, $1,734,000 and $981,000 were capitalized during
the three months ended September 30, 1996 and 1995, respectively, and
$3,832,000 and $2,642,000 were capitalized during the nine months ended
September 30, 1996 and 1995, respectively, on funds invested in development
projects. The increases in corporate interest costs are due to higher levels
of debt used for corporate purposes.
Gain (Loss) on Dispositions of Assets and Other Provisions, Net. The loss in
1996 relates to provisions for losses on two retail centers the Company has
decided to sell ($15,071,000). These provisions were based on the estimated
fair values of the properties less costs to sell. These losses were partially
offset by a gain from the reversal of a portion (approximately $9,000,000) of
the provision for the litigation matter discussed in note 8 to the
consolidated financial statements incorporated by reference herein.
The loss in 1995 relates primarily to provisions for losses on several
retail centers the Company decided to sell ($16,058,000). These provisions
were based on the estimated fair values of the properties less costs to sell.
These losses were partially offset by a gain on the disposition of a retail
center property ($1,940,000).
Extraordinary Losses, Net of Related Income Tax Benefits. During the nine
months ended September 30, 1996 and 1995, the Company incurred extraordinary
losses related to extinguishments of debt prior to scheduled maturity of
$2,094,000 and $11,314,000, respectively, net of related income tax benefits
of $733,000 and $3,960,000, respectively.
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 FINANCIAL CONDITION, LIQUIDITY
AND CAPITAL RESOURCES
Shareholders' equity increased by $143,361,000 from $42,584,000 at December
31, 1995 to $185,945,000 at September 30, 1996. The increase was due primarily
to the value of shares of common stock issued in the acquisition of Hughes
($178,086,000) and net earnings for the nine months ended September 30, 1996,
partially offset by the payment of regular quarterly dividends on the
Company's common and Preferred stocks. On September 30, 1996, all of the
outstanding shares of Series A Preferred stock were converted into 10,582,000
shares of common stock. The conversion had no effect on shareholders' equity.
The Company had cash and cash equivalents and investments in marketable
securities totaling $61,453,000 and $97,832,000 at September 30, 1996 and
December 31, 1995, respectively, including $3,690,000 and $2,910,000,
respectively, held for restricted uses.
The Company has lines of credit for up to $148,120,000 of which $77,620,000
was available at September 30, 1996. These lines of credit may be used to
provide corporate liquidity, fund property acquisition and development costs
and finance other corporate needs, subject to lenders' approvals. They may
also be utilized to pay some portion of existing debt, including maturities in
1996 and 1997. Howard Hughes Properties, Limited Partnership (HHPLP), wholly-
owned by the Company, has a line of credit for up to $100,000,000 of which
$4,000,000 was available at September 30, 1996. This line can be used to fund
certain development costs. In November, 1996, HHPLP refinanced several office
properties that had previously been financed on the credit line and used the
proceeds to repay the credit line, restoring availability to $55,000,000. As
of September 30, 1996, debt due in one year was $123,097,000. Approximately
$63,147,000 of this debt relates to three retail center mortgages due in the
second quarter of 1997, and $11,934,000 relates to an office building mortgage
due in the third quarter of 1997. The
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Company expects to refinance these loans or extend their terms at or prior to
their scheduled maturities. The Company continues to actively evaluate sources
of capital and is confident that it will be able to make these payments,
arrange to refinance these maturities prior to their scheduled repayment dates
or obtain new sources of capital without necessitating property sales.
Net cash provided by operating activities was $91,064,000 and $69,525,000
for the nine months ended September 30, 1996 and 1995, respectively. The
factors discussed previously under the operating results of the four major
business segments, particularly higher land sales revenues, affected the level
of net cash provided by operating activities.
Net cash used in investing activities was $110,685,000 and $64,087,000 for
the nine months ended September 30, 1996 and 1995, respectively. The increase
in net cash used of $46,598,000 was due primarily to the acquisition of Hughes
and lower net sales or redemptions of marketable securities.
Net cash used in financing activities was $17,538,000 and $28,633,000 for
the nine months ended September 30, 1996 and 1995, respectively. The decrease
in net cash used of $11,095,000 is attributable primarily to the use of lines
of credit to fund the acquisition of Hughes and certain project development
costs partially offset by increases in dividends, purchases of treasury stock
and the use of financing proceeds received in the fourth quarter of 1995 to
repay certain higher rate property debt.
DESCRIPTION OF SERIES B PREFERRED STOCK
The summary of certain terms and provisions of the Series B Preferred Stock
contained in this Prospectus Supplement does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the terms and
provisions of the Company's Charter, as amended and restated (the "Charter"),
the Company's Bylaws, as amended, and the Articles Supplementary setting forth
the particular terms of the Series B Preferred Stock (the "Articles
Supplementary"), copies of which are filed as exhibits to the Registration
Statement or are available from the Company.
The Charter authorizes the issuance of 50,000,000 shares of preferred stock,
par value $.01 per share (the "Preferred Stock"). The Preferred Stock may be
issued from time to time in one or more series, without stockholder approval,
with such voting powers (full or limited), designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof as shall be established by the Board of
Directors. Thus, without stockholder approval, the Company could authorize the
issuance of Preferred Stock with voting, conversion and other rights that
could dilute the voting power and other rights of the holders of Common Stock.
GENERAL
The Board of Directors has classified and authorized the issuance of an
aggregate of 4,600,000 shares of the Series B Preferred Stock as part of the
50,000,000 shares of the Company's authorized Preferred Stock.
When issued, the Series B Preferred Stock will be validly issued, fully paid
and nonassessable. The holders of the Series B Preferred Stock will have no
preemptive rights with respect to any shares of capital stock of the Company
or any other securities of the Company convertible into or carrying rights or
options to purchase any such shares. The Series B Preferred Stock will not be
subject to any sinking fund or other obligation of the Company to redeem or
retire the Series B Preferred Stock. Unless converted or redeemed by the
Company, the Series B Preferred Stock will have a perpetual term, with no
maturity. The Series B Preferred Stock has been approved for listing on the
NYSE, subject to official notice of issuance, under the symbol "RSE Pr B." The
shares of Common Stock issuable upon conversion or redemption of the Series B
Preferred Stock are listed on the NYSE.
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RANKING
The Series B Preferred Stock will rank senior to the Increasing Rate
Preferred Stock, the Junior Preferred Stock and the Common Stock with respect
to payment of dividends and amounts upon liquidation, dissolution or winding
up.
While any shares of Series B Preferred Stock are outstanding, the Company
may not authorize, create or increase the authorized amount of any class or
series of stock that ranks senior to the Series B Preferred Stock with respect
to the payment of dividends or amounts upon liquidation, dissolution or
winding up without the consent of the holders of two-thirds of the outstanding
shares of Series B Preferred Stock and all other shares of Voting Preferred
Shares (defined below), voting as a single class. However, the Company may
create additional classes of stock, increase the authorized number of shares
of Preferred Stock or issue series of Preferred Stock ranking on a parity with
the Series B Preferred Stock with respect, in each case, to the payment of
dividends and amounts upon liquidation, dissolution and winding up (a "Parity
Stock") without the consent of any holder of Series B Preferred Stock. See
"Voting Rights" below.
DIVIDENDS
Holders of shares of Series B Preferred Stock will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of
funds of the Company legally available for payment, cumulative cash dividends
at the rate per annum of 6.0% per share on the liquidation preference thereof
or $3.00 per share of Series B Preferred Stock. Dividends on the Series B
Preferred Stock are payable quarterly on the first calendar day of January,
April, July and October of each year (and, in the case of any accrued but
unpaid dividends, at such additional times and for such interim periods, if
any, as determined by the Board of Directors), at such annual rate. Each such
dividend is payable to holders of record as they appear on the stock records
of the Company at the close of business on such record dates, not exceeding 60
days preceding the payment dates thereof as shall be fixed by the Board of
Directors of the Company. Dividends will accrue from the date of the original
issuance of the Series B Preferred Stock. Dividends are cumulative from the
most recent dividend payment date to which dividends have been paid, whether
or not in any dividend period or periods there shall be funds of the Company
legally available for the payment of such dividends. Accumulations of
dividends on shares of Series B Preferred Stock will not bear interest.
Dividends payable on the Series B Preferred Stock for any period greater or
less than a full dividend period will be computed on the basis of a 360-day
year consisting of twelve 30-day months. Dividends payable on the Series B
Preferred Stock for each full dividend period will be computed by dividing the
annual dividend rate by four.
No dividend will be declared or paid on any Parity Stock unless full
cumulative dividends have been declared and paid or are contemporaneously
declared and funds sufficient for payment set aside on the Series B Preferred
Stock for all prior dividend periods, provided, however, that if accrued
dividends on the Series B Preferred Stock for all prior dividend periods have
not been paid in full then any dividend declared on the Series B Preferred
Stock for any dividend period and on any Parity Stock will be declared ratably
in proportion to accrued and unpaid dividends on the Series B Preferred Stock
and such Parity Stock.
The Company will not (i) declare, pay or set apart funds for the payment of
any dividend or other distribution with respect to any Junior Stock (as
defined below) or (ii) redeem, purchase or otherwise acquire for consideration
any Junior Stock through a sinking fund or otherwise (other than (i) a
redemption or purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan of the Company or any
subsidiary or (ii) a purchase or other acquisition of shares of Common Stock
made for purposes of distribution pursuant to the Contingent Stock Agreement,
effective as of January 1, 1996 (the "Agreement"), by the Company, in favor of
and for the benefit of the Holders and the Representatives (as such terms are
defined in the Agreement)), unless (A) all cumulative dividends with respect
to the Series B Preferred Stock and any Parity Stock at the time such
dividends are payable have been paid or funds have been set apart for payment
of such dividends
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and (B) sufficient funds have been paid or set apart for the payment of the
dividend for the current dividend period with respect to the Series B
Preferred Stock and any Parity Stock. The foregoing limitations do not
restrict the Company's ability to take the foregoing actions with respect to
any Parity Stock.
As used herein, (i) the term "dividend" does not include dividends payable
solely in shares of Junior Stock on Junior Stock, or in options, warrants or
rights to holders of Junior Stock to subscribe for or purchase any Junior
Stock, and (ii) the term "Junior Stock" means the Common Stock, and any other
class of capital stock of the Company now or hereafter issued and outstanding
that ranks junior as to the payment of dividends or amounts upon liquidation,
dissolution and winding up to the Series B Preferred Stock.
REDEMPTION
Shares of Series B Preferred Stock will not be redeemable by the Company
prior to April 1, 2000, and at no time will the Series B Preferred Stock be
redeemable for cash. On and after April 1, 2000, the shares of Series B
Preferred Stock will be redeemable at the option of the Company, in whole or
in part, for such number of shares of Common Stock as equals the liquidation
preference of the Series B Preferred Stock to be redeemed divided by the
Conversion Price (as defined below under "Conversion Rights") as of the
opening of business on the date set for such redemption (equivalent to a
conversion rate of 1.311 shares of Common Stock for each share of Series B
Preferred Stock), subject to adjustment in certain circumstances. The Company
may exercise this option only if for 20 trading days within any period of 30
consecutive trading days, including the last trading day of such period, the
closing price of the Common Stock on NYSE exceeds $45.75, subject to
adjustment in certain circumstances. In order to exercise its redemption
option, the Company must issue a press release announcing the redemption prior
to the opening of business on the second trading day after the conditions in
the preceding sentences have, from time to time, been met, but in no event
prior to February 1, 2000.
Notice of redemption will be given by mail or by publication (with
subsequent prompt notice by mail) to the holders of the Series B Preferred
Stock not more than four business days after the Company issues the press
release. The redemption date will be a date selected by the Company not less
than 30 nor more than 60 days after the date on which the Company issues the
press release announcing its intention to redeem the Series B Preferred Stock.
If fewer than all of the shares of Series B Preferred Stock are to be
redeemed, the shares to be redeemed shall be selected by lot or pro rata or in
some other equitable manner determined by the Company.
On the redemption date, the Company must pay on each share of Series B
Preferred Stock to be redeemed any accrued and unpaid dividends, in arrears,
for any dividend period ending on or prior to the redemption date. In the case
of a redemption date falling after a dividend payment record date and prior to
the related payment date, the holders of the Series B Preferred Stock at the
close of business on such record date will be entitled to receive the dividend
payable on such shares on the corresponding dividend payment date,
notwithstanding the redemption of such shares prior to such dividend payment
date. Except as provided for in the preceding sentences, no payment or
allowance will be made for accrued dividends on any shares of Series B
Preferred Stock called for redemption or on the shares of Common Stock
issuable upon such redemption.
In the event that full cumulative dividends on the Series B Preferred Stock
and any Parity Stock have not been paid or declared and set apart for payment,
the Series B Preferred Stock may not be redeemed in part and the Company may
not purchase or acquire shares of Series B Preferred Stock otherwise than
pursuant to a purchase or exchange offer made on the same terms to all holders
of shares of Series B Preferred Stock.
On and after the date fixed for redemption, provided that the Company has
made available at the office of the Registrar and Transfer Agent a sufficient
number of shares of Common Stock and an amount of cash to effect the
redemption, dividends will cease to accrue on the Series B Preferred Stock
called for
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redemption (except that, in the case of a redemption date after a dividend
payment record date and prior to the related dividend payment date, holders of
Series B Preferred Stock on the dividend payment record date will be entitled
on such dividend payment date to receive the dividend payable on such shares),
such shares shall no longer be deemed to be outstanding and all rights of the
holders of such shares as holders of Series B Preferred Stock shall cease
except the right to receive the shares of Common Stock upon such redemption
and any cash payable upon such redemption, without interest from the date of
such redemption. At the close of business on the redemption date, each holder
of Series B Preferred Stock (unless the Company defaults in the delivery of
the shares of Common Stock or cash) will be, without any further action,
deemed a holder of the number of shares of Common Stock for which such Series
B Preferred Stock is redeemable.
Fractional shares of Common Stock are not to be issued upon redemption of
the Series B Preferred Stock, but, in lieu thereof, the Company will pay a
cash adjustment based on the current market price of the Common Stock on the
trading day prior to the redemption date.
LIQUIDATION PREFERENCE
The holders of shares of Series B Preferred Stock will be entitled to
receive in the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, $50.00 per share of Series B
Preferred Stock plus an amount per share of Series B Preferred Stock equal to
all dividends (whether or not earned or declared) accrued and unpaid thereon
to the date of final distribution to such holders (the "Liquidation
Preference"), and no more.
Until the holders of the Series B Preferred Stock have been paid the
Liquidation Preference in full, no payment will be made to any holder of
Junior Stock upon the liquidation, dissolution or winding up of the Company.
If, upon any liquidation, dissolution or winding up of the Company, the assets
of the Company, or proceeds thereof, distributable among the holders of the
shares of Series B Preferred Stock are insufficient to pay in full the
Liquidation Preference and the liquidation preference with respect to any
other shares of Parity Stock, then such assets, or the proceeds thereof, will
be distributed among the holders of shares of Series B Preferred Stock and any
such Parity Stock ratably in accordance with the respective amounts which
would be payable on such shares of Series B Preferred Stock and any such
Parity Stock if all amounts payable thereon were paid in full. Neither a
consolidation or merger of the Company with another corporation, a statutory
share exchange by the Company nor a sale or transfer of all or substantially
all of the Company's assets will be considered a liquidation, dissolution or
winding up, voluntary or involuntary, of the Company.
VOTING RIGHTS
Except as indicated below, or except as otherwise from time to time required
by applicable law, the holders of shares of Series B Preferred Stock will have
no voting rights.
If and whenever six quarterly dividends (whether or not consecutive) payable
on the Series B Preferred Stock or any other Parity Stock are in arrears,
whether or not earned or declared, the number of directors then constituting
the Board of Directors of the Company will be increased by two and the holders
of shares of Series B Preferred Stock, voting together as a class with the
holders of any other series of Parity Stock (any such other series, the
"Voting Preferred Shares"), will have the right to elect two additional
directors to serve on the Company's Board of Directors at an annual meeting of
stockholders or a properly called special meeting of the holders of the Series
B Preferred Stock and such Voting Preferred Shares and at each subsequent
annual meeting of stockholders until all such dividends and dividends for the
current quarterly period on the Series B Preferred Stock and such other Voting
Preferred Shares have been paid or declared and set aside for payment.
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The approval of two-thirds of the outstanding shares of Series B Preferred
Stock and all other series of Voting Preferred Shares, acting as a single
class regardless of series either at a meeting of shareholders or by written
consent, is required in order to amend the Charter and Articles Supplementary
to affect materially and adversely the rights, preferences or voting powers of
the holders of the Series B Preferred Stock or the Voting Preferred Shares or
to authorize, create, or increase the authorized amount of, any class of stock
having rights senior to the Series B Preferred Stock with respect to the
payment of dividends or amounts upon liquidation, dissolution or winding up.
However, the Company may create additional classes of Parity and Junior Stock,
increase the authorized number of shares of Parity and Junior Stock and issue
additional series of Parity and Junior Stock without the consent of any holder
of Series B Preferred Stock.
Except as required by law, the holders of Series B Preferred Stock will not
be entitled to vote on any merger or consolidation involving the Company or a
sale of all or substantially all of the assets of the Company. See "Conversion
Price Adjustments" below.
CONVERSION RIGHTS
Shares of Series B Preferred Stock will be convertible, in whole or in part,
at any time, at the option of the holders thereof, into shares of Common Stock
at a conversion price of $38.125 per share of Common Stock (equivalent to a
conversion rate of 1.311 shares of Common Stock for each share of Series B
Preferred Stock), subject to adjustment as described below ("Conversion
Price"). The right to convert shares of Series B Preferred Stock called for
redemption will terminate at the close of business on a redemption date. For
information as to notices of redemption, see "Redemption" above.
Conversion of shares of Series B Preferred Stock, or a specified portion
thereof, may be effected by delivering certificates evidencing such shares,
together with written notice of conversion and a proper assignment of such
certificates to the Company or in blank, to the office or agency to be
maintained by the Company for that purpose. Currently, such office is the
principal corporate trust office of The Bank of New York, New York, New York.
Each conversion will be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of
Series B Preferred Stock shall have been surrendered and notice shall have
been received by the Company as aforesaid (and if applicable, payment of any
amount equal to the dividend payable on such shares shall have been received
by the Company as described below) and the conversion shall be at the
Conversion Price in effect at such time and on such date.
Holders of shares of Series B Preferred Stock at the close of business on a
dividend payment record date will be entitled to receive the dividend payable
on such shares on the corresponding dividend payment date notwithstanding the
conversion of such shares following such dividend payment record date and
prior to such dividend payment date. However, shares of Series B Preferred
Stock surrendered for conversion during the period between the close of
business on any dividend payment record date and ending with the opening of
business on the corresponding dividend payment date (except shares converted
after the issuance of a notice of redemption with respect to a redemption date
during such period or coinciding with such dividend payment date, which will
be entitled to such dividend) must be accompanied by payment of an amount
equal to the dividend payable on such shares on such dividend payment date. A
holder of shares of Series B Preferred Stock on a dividend record date who (or
whose transferee) tenders any such shares for conversion into shares of Common
Stock on such dividend payment date will receive the dividend payable by the
Company on such shares of Series B Preferred Stock on such date, and the
converting holder need not include payment of the amount of such dividend upon
surrender of shares of Series B Preferred Stock for conversion. Except as
provided above, the Company will make no payment or allowance for unpaid
dividends, whether or not in arrears, on converted shares or for dividends on
the shares of Common Stock issued upon such conversion.
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Fractional shares of Common Stock are not to be issued upon conversion but,
in lieu thereof, the Company will pay a cash adjustment based on the current
market price of the Common Stock on the trading day prior to the conversion
date.
CONVERSION PRICE ADJUSTMENTS
The Conversion Price is subject to adjustment upon certain events, including
(i) the payment of dividends (and other distributions) payable in Common Stock
on any class of capital stock of the Company, (ii) the issuance to all holders
of Common Stock of certain rights or warrants entitling them to subscribe for
or purchase Common Stock at a price per share less than the fair market value
per share of Common Stock, (iii) subdivisions, combinations and
reclassifications of Common Stock, and (iv) distributions to all holders of
Common Stock of evidences of indebtedness of the Company or assets (including
securities, but excluding those dividends, rights, warrants and distributions
referred to above and dividends and distributions paid in cash out of equity,
including revaluation equity, applicable to Common Stock). In addition to the
foregoing adjustments, the Company will be permitted to make such reductions
in the Conversion Price as it considers to be advisable in order that any
event treated for Federal income tax purposes as a dividend of stock or stock
rights will not be taxable to the holders of the Common Stock.
In case the Company shall be a party to any transaction (including, without
limitation, a merger, consolidation, statutory share exchange, tender offer
for all or substantially all of the shares of Common Stock or sale of all or
substantially all of the Company's assets), in each case as a result of which
shares of Common Stock will be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
share of Series B Preferred Stock, if convertible after the consummation of
the transaction, will thereafter be convertible into the kind and amount of
shares of stock and other securities and property receivable (including cash
or any combination thereof) upon the consummation of such transaction by a
holder of that number of shares or fraction thereof of Common Stock into which
one share of Series B Preferred Stock was convertible immediately prior to
such transaction (assuming such holder of Common Stock failed to exercise any
rights of election and received per share the kind and amount received per
share by a plurality of non-electing shares). The Company may not become a
party to any such transaction unless the terms thereof are consistent with the
foregoing.
No adjustment of the Conversion Price is required to be made in any case
until cumulative adjustments amount to 1% or more of the Conversion Price. Any
adjustments not so required to be made will be carried forward and taken into
account in subsequent adjustments.
TRANSFER AGENT, REGISTRAR, DIVIDEND DISBURSING AGENT AND REDEMPTION AGENT
The transfer agent, registrar, dividend disbursing agent and redemption
agent for the shares of Series B Preferred Stock is The Bank of New York, New
York, New York.
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CERTAIN INCOME TAX CONSIDERATIONS
The following is a general discussion of certain federal income tax
consequences to holders of the Series B Preferred Stock. This summary does not
purport to discuss all of the federal income tax consequences that may be
applicable to particular categories of investors (such as broker-dealers,
foreign persons, non-resident alien individuals, insurance companies, tax-
exempt organizations, persons subject to the alternative minimum tax and
financial institutions) and does not discuss foreign, state or local tax
consequences. This summary is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), regulations promulgated thereunder ("Regulations"),
court decisions and administrative rulings and practice, all as in effect on
the date of this Prospectus Supplement. Future legislative, judicial or
administrative changes, which might or might not have retroactive application,
could modify significantly the statements and conclusions expressed in this
summary. The Company will not request any rulings from the Internal Revenue
Service regarding the tax consequences of an investment in shares of the
Series B Preferred Stock. Each potential investor is advised to consult its
own tax advisor concerning the federal, state, local and foreign tax
consequences of an investment in shares of the Series B Preferred Stock.
The following discussion is based on the assumption that shares of the
Series B Preferred Stock are held as capital assets within the meaning of
Section 1221 of the Code.
DISTRIBUTIONS ON SERIES B PREFERRED STOCK
Distributions paid on the Series B Preferred Stock will be treated as
dividends taxable as ordinary income to the holders to the extent of the
Company's current or accumulated earnings and profits as determined under
federal income tax principles. While the Company had earnings and profits in
1996 and anticipates having earnings and profits for federal income tax
purposes in future years, there can be no assurance that the Company will have
current or accumulated earnings and profits in any future years. To the extent
that the amount of distributions paid on the Series B Preferred Stock exceeds
the Company's current or accumulated earnings and profits, such distributions
will be treated as a nontaxable return of capital and will be applied against
and reduce the adjusted tax basis of the Series B Preferred Stock in the hands
of each holder (but not below zero). The amount of any such distribution which
exceeds the adjusted tax basis of the Series B Preferred Stock in the hands of
the holder will be treated as capital gain and will be long-term capital gain
if the holder's holding period for the Series B Preferred Stock exceeds one
year. Under current law, long-term capital gains of noncorporate taxpayers are
generally taxed at rates more favorable than those applicable to other types
of income. Legislative changes have been proposed from time to time that would
affect the manner in which capital gains are taxed; whether any such proposals
will be enacted into law and, if so, in what form they will be enacted, is
currently unknown. Under Section 243 of the Code, corporate stockholders
generally will be able, subject to certain exceptions and restrictions, to
deduct 70% of the amount of any distribution qualifying as a dividend.
REDEMPTION OR CONVERSION OF SERIES B PREFERRED STOCK FOR OR INTO COMMON STOCK
The discussion in this paragraph assumes that shares of the Series B
Preferred Stock will not be redeemed or converted at a time when there are
dividends in arrears. Generally, no gain or loss will be recognized for
federal income tax purposes on redemption or conversion of the Series B
Preferred Stock into or for shares of Common Stock (except that cash paid in
lieu of fractional shares of Common Stock will be taxed as though such cash
had been received in redemption of such fractional share interest). The tax
basis of the shares of Common Stock received upon redemption or conversion
will be equal to the adjusted tax basis of the Series B Preferred Stock
redeemed or converted, less any amount of basis allocable to the fractional
shares, and the holding period of such shares of Common Stock will include the
holding period of the Series B Preferred Stock redeemed or converted.
ADJUSTMENT OF CONVERSION PRICE
Certain adjustments to the conversion price of the Series B Preferred Stock
may, under certain circumstances, be treated as constructive distributions
that are taxable to holders of the Series B Preferred Stock at the time of
adjustment under Sections 301 and 305 of the Code.
S-37
<PAGE>
BACKUP WITHHOLDING
Under Section 3406 of the Code and applicable Regulations, a noncorporate
holder of the Series B Preferred Stock or Common Stock may be subject to
backup withholding at the rate of 31% with respect to reportable payments of
dividends accrued with respect to, or the proceeds of a sale, exchange or
redemption of, the Series B Preferred Stock or Common Stock, as the case may
be. The payor will be required to deduct and withhold the prescribed amount
with respect to all such reportable payments if (i) the payee fails to furnish
a taxpayer identification number ("TIN") to the payor or (ii) the Secretary of
the Treasury notifies the payor that the TIN furnished by the payee is
incorrect. In addition, the payor will also be required to deduct and withhold
the prescribed amount with respect to dividend payments if (iii) there has
been a "notified payee underreporting," as described in Section 3406(c) of the
Code or (iv) there has been a failure of the payee to certify to the payor
under the penalty of perjury that such payee is not subject to withholding, as
described in Section 3406(d) of the Code. Amounts paid as backup withholding
do not constitute an additional tax and will be credited against the holder's
federal income tax liabilities.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX
PLANNING. ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF THE
SERIES B PREFERRED STOCK, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL
OR FOREIGN TAX LAWS.
S-38
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the underwriters named below (the "Underwriters") have severally agreed to
purchase from the Company the following respective number of shares of Series
B Preferred Stock at the public offering price less the underwriting discounts
and commissions set forth on the cover page of this Prospectus Supplement:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Alex. Brown & Sons Incorporated.................................... 1,333,334
Goldman, Sachs & Co. .............................................. 1,333,333
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................. 1,333,333
---------
Total............................................................ 4,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all of the shares of Series B Preferred Stock offered hereby if any
of such shares are purchased.
The Company has been advised by the Underwriters that the Underwriters
propose to offer the shares of Series B Preferred Stock to the public at the
public offering price set forth on the cover page of this Prospectus
Supplement and to certain dealers at such price less a concession not in
excess of $.75 per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $.10 per share to certain other
dealers. After the public offering, the offering price and other selling terms
may be changed by the Underwriters.
The Company has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase, in whole or in
part, up to 600,000 additional shares of Series B Preferred Stock at the
public offering price less the underwriting discounts and commissions set
forth on the cover page of this Prospectus Supplement. To the extent that the
Underwriters exercise such option, each of the Underwriters will have a firm
commitment to purchase approximately the same percentage thereof that the
number of shares of Series B Preferred Stock purchased by it shown in the
above table bears to 4,000,000 and the Company will be obligated, pursuant to
the option, to sell such shares to the Underwriters. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of the Series B Preferred Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 4,000,000 shares of Series B Preferred Stock are being offered
hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Company has agreed that, until 90 days after the date of this Prospectus
Supplement, it will not, without the prior written consent of Alex. Brown &
Sons Incorporated, sell, offer to sell, issue, distribute or otherwise dispose
of any shares of Series B Preferred Stock or Common Stock or any rights to
purchase or other securities convertible into or exchangeable for any
securities of the Company substantially similar to any such shares, except for
(i) the Series B Preferred Stock offered hereby, (ii) the shares of Common
Stock issuable upon conversion of the Series B Preferred Stock offered hereby,
(iii) the shares of Common Stock issuable upon the exercise of options,
warrants and stock appreciation rights and upon conversions of the Company's
convertible subordinated debentures, in each case which were outstanding on
the date hereof, (iv) rights or options issued under, or the shares of Common
Stock issuable pursuant to, the Company's employee stock option, bonus stock
and stock incentive plans and (v) the shares of Common Stock issuable to the
Hughes Owners pursuant to the Contingent Stock Agreement (as each such term is
defined in "Description of Common Stock--General" in the accompanying
Prospectus).
S-39
<PAGE>
Alex. Brown & Sons Incorporated, Goldman, Sachs & Co. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated have in the past performed various
investment banking and other services for the Company.
The shares of Series B Preferred Stock are a new issue of securities with no
established trading market. The Company has been advised by the Underwriters
that they intend to make a market in the shares of Series B Preferred Stock
but are not obligated to do so and may discontinue market making at any time
without notice. No assurance can be given as to the liquidity of the trading
market for the shares of Series B Preferred Stock. The Series B Preferred
Stock has been approved for listing on the NYSE, subject to official notice of
issuance, under the symbol "RSE Pr B."
S-40
<PAGE>
THE ROUSE COMPANY
COMMON STOCK, PREFERRED STOCK AND DEBT SECURITIES
----------------
The Rouse Company (the "Company" or "Rouse") may offer, from time to time,
together or separately, (i) shares of its common stock, $0.01 par value per
share (the "Common Stock"), (ii) shares of its preferred stock, $0.01 par
value per share (the "Preferred Stock"), and (iii) debt securities (the "Debt
Securities"), in each case, in amounts, at prices and on such terms to be
determined at the time of the offering. The Common Stock, the Preferred Stock
and the Debt Securities are collectively called the "Securities."
The Securities offered pursuant to this Prospectus may be issued in one or
more series and/or issuances and will have an aggregate public offering price
of up to $500 million (or the equivalent thereof, based on the applicable
exchange rate at the time of sale, in one or more foreign currencies, currency
units or composite currencies as shall be designated by the Company). Certain
specific terms of the particular Securities in respect of which this
Prospectus is being delivered are set forth in the accompanying Prospectus
Supplement (the "Prospectus Supplement"), including, where applicable, (i) in
the case of Common Stock, the aggregate number of shares offered, the public
offering price and other terms of the offering and sale thereof, (ii) in the
case of Preferred Stock, the specific title, the aggregate number of shares
offered, any dividend (including the method of calculating payment of
dividends), liquidation, redemption, voting and other rights, any terms for
any conversion or exchange into other securities, and the public offering
price and other terms of the offering and sale thereof and (iii) in the case
of Debt Securities, the specific title, the aggregate principal amount, the
aggregate offering price, the denomination, the maturity, the premium, if any,
the interest rate (which may be fixed, floating or adjustable), if any, the
time and method of calculating payment of interest, if any, the place or
places where principal of, premium, if any, and interest, if any, on such Debt
Securities will be payable, the currency in which principal of, premium, if
any, and interest, if any, on such Debt Securities will be payable, any terms
of redemption at the option of the Company or repayment at the option of the
holder thereof, any sinking fund provisions, the terms for any conversion or
exchange into other securities, any other special terms, and the public
offering price and other terms of the offering and sale thereof. If so
specified in the applicable Prospectus Supplement, Debt Securities of a series
may be issued in whole or in part in the form of one or more temporary or
permanent global securities.
The Common Stock is listed on the New York Stock Exchange (the "NYSE") under
the trading symbol "RSE." Any Common Stock sold pursuant to a Prospectus
Supplement will be listed on such exchange, subject to official notice of
issuance.
Unless otherwise specified in a Prospectus Supplement, the Debt Securities,
when issued, will be unsecured and unsubordinated obligations of the Company
and will rank pari passu in right of payment with all other unsecured and
unsubordinated indebtedness of the Company.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The Securities may be sold directly, through agents, underwriters or dealers
as designated from time to time, or through a combination of such methods. If
agents of the Company or any dealers or underwriters are involved in the sale
of the Securities in respect of which this Prospectus is being delivered, the
names of such agents, dealers or underwriters and any applicable commissions
or discounts will be set forth in or may be calculated from the Prospectus
Supplement with respect to such Securities.
----------------
The date of this Prospectus is February 6, 1997.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
----------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at Seven
World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a Web site (http://www.sec.gov) from
which such reports, proxy statements and other information may be obtained. In
addition, reports, proxy statements and other information concerning the
Company may be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments, supplements and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), of which this Prospectus constitutes a part. This
Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which were omitted in accordance with
the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement. Any statements
contained herein concerning the provisions of any document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of
such document so filed. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company pursuant to
the Exchange Act are incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1995.
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.
3. Current Report on Form 8-K, dated June 27, 1996.
4. Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
5. Amendment to Current Report on Form 8-K/A, dated August 14, 1996.
6. Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.
7. Description of Contingent Stock Agreement (as herein defined) is
incorporated by reference to the caption "The Contingent Stock
Agreement; The Contractual Rights" contained in the Registration
Statement on Form S-4 (File No. 333-1693) filed March 13, 1996, as
amended.
All other documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of this offering shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the respective
dates of the filing of such documents.
2
<PAGE>
Any statement contained herein or in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person, including a
beneficial owner, to whom a copy of this Prospectus has been delivered, upon
the written or oral request of any such person, a copy of any and all of the
documents incorporated herein by reference into this Prospectus, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in such documents). Requests for such copies should be directed
to David L. Tripp, Vice President and Director of Investor Relations, The
Rouse Company, 10275 Little Patuxent Parkway, Columbia, Maryland 21044-3456,
Telephone: (410) 992-6000.
THE COMPANY
The Rouse Company is one of the largest publicly-traded (NYSE) real estate
companies in the United States. Through its subsidiaries and affiliates
(collectively, with The Rouse Company, referred to as the "Company"), the
Company 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 hotels, and the management of a retail center in Canada,
and (ii) the development and sale of land to builders and other developers,
primarily around Columbia, Maryland and Las Vegas (Summerlin), Nevada, for
residential, commercial and industrial uses.
USE OF PROCEEDS
Unless otherwise indicated in any accompanying Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth (i) the ratio of earnings to fixed charges
and (ii) the ratio of earnings to combined fixed charges and Preferred stock
dividend requirements of the Company for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------- ------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges
(1)(3)................................. 1.14 1.05 1.04 1.06 1.01 -- --
Ratio of earnings to combined fixed
charges and Preferred stock dividend
requirements (2)(4).................... 1.04 -- -- -- -- -- --
</TABLE>
- --------
(1) The ratio of earnings to fixed charges is computed by dividing fixed
charges into net earnings (loss) before income taxes, extraordinary loss
and cumulative effect of change in accounting principle, adjusted for
minority interest in earnings, amortization of interest costs previously
capitalized and certain other items, plus fixed charges other than
capitalized interest. Fixed charges include interest costs, the estimated
interest component of rent expense and certain other items.
(2) The ratio of earnings to combined fixed charges and Preferred stock
dividend requirements is computed by dividing total combined fixed charges
and amounts of pre-tax earnings required to cover Preferred stock dividend
requirements into net earnings (loss) before income taxes, extraordinary
loss and cumulative effect of change in accounting principle, adjusted for
minority interest in earnings, amortization of interest costs previously
capitalized and certain other items, plus fixed charges other than
capitalized interest. Fixed charges include interest costs, the estimated
interest component of rent expense and certain other items.
(3) 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.
(4) 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 $9,597,000 for the nine months
ended September 30, 1995, and 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.
3
<PAGE>
DESCRIPTION OF COMMON STOCK
GENERAL
The following summary of certain terms and provisions of the Common Stock
does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the Maryland General Corporation Law (the "MGCL")
and to the terms and provisions of the Amended and Restated Articles of
Incorporation, as amended, including all Articles Supplementary thereto, of
the Company (the "Charter") and the By-laws, as amended, of the Company (the
"Bylaws"), copies of which are filed as exhibits to the Registration Statement
of which this Prospectus forms a part.
The Charter authorizes the issuance of 250,000,000 shares of Common Stock
and, as of January 29, 1997, 66,793,633 shares of Common Stock were issued and
outstanding. All outstanding shares of Common Stock are validly issued, fully
paid and nonassessable.
In connection with the Company's acquisition in June 1996 (the "Hughes
Acquisition") of all the outstanding equity interests in The Hughes
Corporation and its affiliated partnership, Howard Hughes Properties, Limited
Partnership (collectively, "Hughes"), the Company entered into an agreement
(the "Contingent Stock Agreement") for the benefit of the former Hughes equity
owners (or their successors) (the "Hughes Owners") pursuant to which shares of
Common Stock, or under certain circumstances, Increasing Rate Cumulative
Preferred Stock, par value $0.01 per share (the "Increasing Rate Preferred
Stock"), of the Company may be issued to the Hughes Owners over a 14-year
period ending in 2009. The number of shares of Common Stock (or, under certain
circumstances, Increasing Rate Preferred Stock) that may be issued will be
determined on the basis of the net cash flow generated from and the appraised
value of certain assets acquired in the Hughes Acquisition. Any shares of
Increasing Rate Preferred Stock, if issued, will be exchangeable, at the
Company's option, for shares of Common Stock.
The Company currently has outstanding 500,000 warrants to purchase Common
Stock (the "Warrants"). Each Warrant allows the holder thereof to purchase one
share of Common Stock at an exercise price of $18 per share, subject to
adjustment in certain circumstances. The Warrants expire on September 23,
1997.
The Company also has outstanding $130,000,000 aggregate principal amount of
5 3/4% Convertible Subordinated Debentures due 2002. The debentures are
convertible by the holders thereof into Common Stock at a conversion price
equal to $28.625 principal amount of each debenture for each share of Common
Stock (subject to adjustment in certain circumstances).
DIVIDEND RIGHTS
The holders of Common Stock are entitled to receive such dividends as are
declared by the Board of Directors of the Company, after payment of, or
provision for, full cumulative dividends for outstanding Preferred Stock.
VOTING RIGHTS
Each share of Common Stock is entitled to one vote on all matters submitted
to a vote of stockholders, including the election of directors. Cumulative
voting for directors is not permitted. Holders of Common Stock and Preferred
Stock, when outstanding and when entitled to vote, vote as a class, except
with respect to matters that (i) relate only to the rights, terms or
conditions of Preferred Stock, (ii) affect only the holders of Preferred Stock
or (iii) relate to the rights of the holders of Preferred Stock if the Company
fails to fulfill any of its obligations regarding such stock.
LIQUIDATION RIGHTS
Upon any dissolution, liquidation or winding up of the Company, the holders
of Common Stock are entitled to receive pro rata all of the Company's assets
and funds remaining after payment of, or provision for, creditors and
distribution of, or provision for, preferential amounts and unpaid accumulated
dividends to holders of Preferred Stock.
PREEMPTIVE RIGHTS
Holders of Common Stock have no preemptive right to purchase or subscribe
for any shares of the Company's capital stock.
4
<PAGE>
SPECIAL STATUTORY REQUIREMENTS FOR CERTAIN TRANSACTIONS
The summaries of the following statutes do not purport to be complete and
are subject to and qualified in their entirety by reference to the applicable
provisions of the MGCL.
BUSINESS COMBINATION STATUTE. The MGCL establishes special requirements with
respect to "business combinations" between Maryland corporations and
"interested stockholders," unless exemptions are applicable. Among other
things, the law prohibits for a period of five years a merger or other
specified transactions between a company and an interested stockholder and
requires a super-majority vote for such transactions after the end of such
five-year period.
"Interested stockholders" are all persons owning beneficially, directly or
indirectly, 10% or more of the outstanding voting stock of a Maryland
corporation. "Business combinations" include any merger or similar transaction
subject to a statutory vote and additional transactions involving transfers of
assets or securities in specified amounts to interested stockholders or their
affiliates. Unless an exemption is available, transactions of these types may
not be consummated between a Maryland corporation and an interested
stockholder or its affiliates for a period of five years after the date on
which the stockholder first became an interested stockholder and thereafter
may not be consummated unless recommended by the board of directors of the
Maryland corporation and approved by the affirmative vote of at least 80% of
the votes entitled to be cast by all holders of outstanding shares of voting
stock and 66 2/3% of the votes entitled to be cast by all holders of
outstanding shares of voting stock other than the interested stockholder. A
business combination with an interested stockholder which is approved by the
board of directors of a Maryland corporation at any time before an interested
stockholder first becomes an interested stockholder is not subject to the
five-year moratorium or special voting requirements. The Bylaws specifically
provide that the foregoing provisions apply to any such business combination
with the Company. An amendment to a Maryland corporation's charter electing
not to be subject to the foregoing requirements must be approved by the
affirmative vote of at least 80% of the votes entitled to be cast by all
holders of outstanding shares of voting stock and 66 2/3% of the votes
entitled to be cast by holders of outstanding shares of voting stock who are
not interested stockholders. Any such amendment is not effective until 18
months after the vote of stockholders and does not apply to any business
combination of a corporation with a stockholder who was an interested
stockholder on the date of the stockholder vote. The Company has not adopted
any such amendment to its charter.
CONTROL SHARE ACQUISITION STATUTE. The MGCL imposes limitations on the
voting rights of shares acquired in a "control share acquisition." The
Maryland statute defines a "control share acquisition" at the 20%, 33 1/3% and
50% acquisition levels, and requires a two-thirds stockholder vote (excluding
shares owned by the acquiring person and certain members of management) to
accord voting rights to stock acquired in a control share acquisition. The
statute also requires Maryland corporations to hold a special meeting at the
request of an actual or proposed control share acquirer generally within 50
days after a request is made with the submission of an "acquiring person
statement," but only if the acquiring person (a) posts a bond for the cost of
the meeting and (b) submits a definitive financing agreement to the extent
that financing is not provided by the acquiring person. In addition, unless
the charter or bylaws provide otherwise, the statute gives the Maryland
corporation, within certain time limitations, various redemption rights if
there is a stockholder vote on the issue and the grant of voting rights is not
approved, or if an "acquiring person statement" is not delivered to the target
within ten days following a control share acquisition. Moreover, unless the
charter or bylaws provide otherwise, the statute provides that, if, before a
control share acquisition occurs, voting rights are accorded to control shares
which result in the acquiring person having majority voting power, then
minority stockholders have appraisal rights. An acquisition of shares may be
exempted from the control share statute provided that a charter or bylaw
provision is adopted for such purpose prior to the control share acquisition.
The Bylaws specifically provide that the statutory provisions relating to
control share acquisitions do not apply.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The Bank of New
York, New York, New York.
5
<PAGE>
DESCRIPTION OF PREFERRED STOCK
GENERAL
The following summaries of certain terms and provisions of the Preferred
Stock do not purport to be complete and are subject to, and qualified in their
entirety by reference to, the MGCL and the terms and provisions of the
Charter, including the Articles Supplementary setting forth the particular
terms of (i) the Increasing Rate Preferred Stock and (ii) the 10.25% Junior
Preferred Stock, Series 1996 (the "Junior Preferred Stock"), and to the
Bylaws, copies of which are incorporated by reference into the Registration
Statement of which this Prospectus forms a part.
The Charter authorizes the issuance of 50,000,000 shares of Preferred Stock,
of which (i) 10,000,000 shares have been classified as Increasing Rate
Cumulative Preferred Stock and (ii) 37,362 shares have been classified as
10.25% Junior Preferred Stock, 1996 Series. Preferred Stock may be issued from
time to time in one or more series, without stockholder approval, with such
voting powers (full or limited), designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions as shall be established by the Board of Directors
of the Company. Thus, without stockholder approval, the Company could
authorize the issuance of Preferred Stock with voting, conversion and other
rights that could dilute the voting power and other rights of the holders of
Common Stock.
The particular terms of any series of Preferred Stock offered by any
Prospectus Supplement will be described in the Prospectus Supplement relating
to such series of Preferred Stock. At any time that any series of Preferred
Stock is authorized, the Board of Directors of the Company or a duly
authorized Committee of such Board of Directors will fix the dividend rights,
any conversion rights, any voting rights, redemption provisions, liquidation
preferences and any other rights, preferences, privileges and restrictions of
such series, as well as the number of shares constituting such series and the
designation thereof. The description of the terms of a particular series of
Preferred Stock that will be set forth in a Prospectus Supplement does not
purport to be complete and will be qualified in its entirety by reference to
the Articles Supplementary relating to such series.
Currently, no shares of Increasing Rate Preferred Stock are issued and
outstanding, and one share of Junior Preferred Stock is issued and
outstanding.
INCREASING RATE PREFERRED STOCK
GENERAL. On February 22, 1996, the Board of Directors of the Company
authorized the Company to classify and issue the Increasing Rate Preferred
Stock as part of the 50,000,000 shares of authorized Preferred Stock. The
Increasing Rate Preferred Stock is issuable only in connection with the Hughes
Acquisition and only to Hughes Owners. Pursuant to the terms of the Contingent
Stock Agreement, the Company will be obligated to issue and deliver shares of
Increasing Rate Preferred Stock to Hughes Owners if the Company is unable to
issue and deliver shares of Common Stock to them or if the representatives of
the Hughes Owners (which representatives have been appointed under the
Contingent Stock Agreement (the "Representatives")) require the Company to
issue and deliver such shares of Increasing Rate Preferred Stock following
certain events of default under the Agreement. The Company's contingent
obligation to issue and deliver shares of Increasing Rate Preferred Stock to
Hughes Owners will terminate if and when the Company's stockholders approve
the issuance of Common Stock to the Hughes Owners in accordance with the rules
of the NYSE; provided that such termination will not apply to (i) any
obligation to issue and deliver such shares prior to such termination and (ii)
any obligation to issue and deliver such shares if the Representatives so
require following certain events of default under the Contingent Stock
Agreement. Pursuant to the Contingent Stock Agreement, the Company is required
to use its reasonable efforts to obtain such stockholder approval prior to
July 15, 1997.
If and when issued, the Increasing Rate Preferred Stock will be validly
issued, fully paid and nonassessable. The holders of Increasing Rate Preferred
Stock will have no preemptive rights with respect to any shares of capital
stock of the Company or any other securities of the Company convertible into
or carrying rights or options to purchase any such shares. The Increasing Rate
Preferred Stock will not be subject to any sinking fund. Unless exchanged for
Common Stock or redeemed, the Increasing Rate Preferred Stock will have a
perpetual term, with no maturity. The shares of Common Stock issuable upon the
exchange of Increasing Rate Preferred Stock will be listed on the NYSE.
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RANKING. The Increasing Rate Preferred Stock will rank pari passu with any
Parity Stock (as defined below) and will rank senior to the Junior Preferred
Stock, the Common Stock and any other Junior Stock (as defined below) with
respect to the payment of dividends and amounts upon liquidation, dissolution
or winding up.
While any shares of Increasing Rate Preferred Stock are outstanding, unless
the Company first obtains the consent of the Representatives or the consent of
the holders of at least 66 2/3% of the outstanding shares of Increasing Rate
Preferred Stock, the Company may not, either directly or indirectly or through
a merger or consolidation of the Company with another entity (a "Rouse
Merger"), (i) issue (or approve the issuance of) or increase the authorized
number of shares of any Parity Dividend Stock, Parity Liquidation Stock or
Prior Stock (as such terms are defined below), (ii) declare, pay or set apart
funds for the payment of any dividends (other than dividends payable in Junior
Stock) or make any other distribution on or with respect to shares of Junior
Stock, (iii) declare, pay or set apart funds for the payment of any dividends
(other than dividends payable in Junior Stock) or make any other distribution
on or with respect to shares of Parity Dividend Stock or Parity Liquidation
Stock, unless simultaneously therewith a proportionate dividend on the
Increasing Rate Preferred Stock is ratably distributed or (iv) redeem, retire
or otherwise acquire for value or set apart any funds for the redemption or
purchase of any shares of Junior Stock (other than Common Stock to effect an
Exchange (as defined below)) or any warrant, option or right to acquire shares
thereof.
"Junior Stock" means the Common Stock and any other capital stock of the
Company ranking junior to the Increasing Rate Preferred Stock with respect to
distributions of assets upon the dissolution, liquidation or winding up of the
Company, whether voluntary or involuntary, or with respect to the payment of
dividends.
"Parity Dividend Stock" means any capital stock of the Company ranking on a
parity with the Increasing Rate Preferred Stock with respect to the payment of
dividends.
"Parity Liquidation Stock" means any capital stock of the Company ranking on
a parity with the Increasing Rate Preferred Stock with respect to
distributions of assets upon the dissolution, liquidation or winding up of the
Company, whether voluntary or involuntary.
"Parity Stock" means any capital stock of the Company ranking on a parity
with the Increasing Rate Preferred Stock with respect to distributions of
assets upon the dissolution, liquidation or winding up of the Company, whether
voluntary or involuntary, or with respect to the payment of dividends.
"Prior Stock" means any capital stock of the Company ranking prior to the
Increasing Rate Preferred Stock with respect to distributions of assets upon
the dissolution, liquidation or winding up of the Company, whether voluntary
or involuntary, or with respect to the payment of dividends.
DIVIDENDS. Holders of shares of Increasing Rate Preferred Stock will be
entitled to receive for each such share, when and as declared by the Board of
Directors of the Company, out of funds of the Company legally available for
payment, cumulative cash dividends on the Liquidation Value (as defined below)
of such share at the Dividend Rate (as defined below). Dividends on the
Increasing Rate Preferred Stock will be payable semi-annually (each, a
"Dividend Payment Date") at such rate on the first business day following the
end of each six-month period beginning January 1 and July 1 of each year (each
such six-month period, a "Dividend Period"). Dividends will be payable to
holders of record as they appear on the stock records of the Company at the
close of business 15 days prior to the end of the applicable Dividend Period.
Dividends on shares of Increasing Rate Preferred Stock (whether or not earned
or declared) will accrue from the date of issuance of such shares (the "Issue
Date") until such shares are redeemed or exchanged as described below.
Dividends will be cumulative from the Issue Date, whether or not in any
Dividend Period or Periods there are funds of the Company legally available
for the payment of such dividends. Accumulations of dividends on shares of
Increasing Rate Preferred Stock will not bear interest.
Unless all accrued and unpaid dividends on Increasing Rate Preferred Stock
have been paid in full or funds sufficient for such payment have been set
apart therefor, the Company may not (i) pay or set apart funds for the
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payment of any dividend with respect to any Junior Dividend Stock (as defined
below), (ii) pay or set apart funds for the payment of any dividend with
respect to any Parity Dividend Stock, other than pro rata with, and
recognizing all accrued and unpaid dividends on, the Increasing Rate Preferred
Stock and all other classes or series of Parity Dividend Stock, (iii) make any
distribution (other than in Junior Dividend Stock) on, redeem or purchase any
Junior Liquidation Stock or (iv) make any distribution on, redeem or purchase
any Parity Liquidation Stock.
To the extent that the Company does not have sufficient funds to pay (or set
apart for payment) the full amount of accrued but unpaid dividends on the
Increasing Rate Preferred Stock on any given Dividend Payment Date, any
payments made (or funds set apart for such payments) by the Company in respect
of such dividends will be made ratably to the holders of such Increasing Rate
Preferred Stock in proportion to the number of shares held by them.
"Base Rate" means (i) with respect to the Dividend Period during which Rouse
issues shares of Increasing Rate Preferred Stock for the first time, the
dividend rate, as determined by a nationally recognized investment banking
firm selected by the Company for such purpose and reasonably acceptable to the
Representatives, which would be required in order for the Company to
successfully sell at par (i.e., stated liquidation value), in a private
placement transaction, a class or series of its perpetual preferred stock as
of such time and (ii) with respect to each subsequent Dividend Period, the
dividend rate, as determined by a nationally recognized investment banking
firm selected by the Company for such purpose and reasonably acceptable to the
Representatives, which would be required in order for the Company to
successfully sell at par (i.e., stated liquidation value), in a private
placement transaction, a class of its perpetual preferred stock as of the
first day of such Dividend Period.
"Dividend Rate" means a rate per annum equal to the Base Rate plus the
Spread, in each case as in effect during a Dividend Period; provided, however,
that in the event that any share of Increasing Rate Preferred Stock shall have
an Issue Date other than on the first day of any Dividend Period, the Dividend
Rate with respect to such share during the Dividend Period in which such Issue
Date occurs shall be calculated on the basis of the applicable Dividend Rate
for such Dividend Period for the period commencing with the Issue Date to and
including the last day of such Dividend Period.
"Junior Dividend Stock" means Common Stock and any other capital stock of
the Company ranking junior to the Increasing Rate Preferred Stock with respect
to the payment of dividends.
"Junior Liquidation Stock" means Common Stock and any capital stock of the
Company junior to the Increasing Rate Preferred Stock with respect to
distributions of assets upon the dissolution, liquidation or winding up of the
Company, whether voluntary or involuntary.
"Liquidation Value" means, with respect to a share of Increasing Rate
Preferred Stock, $100 plus all dividends (whether or not earned or declared),
accrued and unpaid on such share.
"Spread" (i) for the Dividend Period during which Rouse issues shares of
Increasing Rate Preferred Stock for the first time shall be 3.50% per annum
and (ii) for each Dividend Period thereafter shall be the Spread for the
immediately preceding Dividend Period plus 0.50%.
REDEMPTION. Any holder of Increasing Rate Preferred Stock may elect to have
the Company redeem all or any portion of such holder's shares on any Dividend
Payment Date (the "Redemption Date") by delivering to the Company a redemption
notice at least 30 but not more than 60 days prior to such Redemption Date;
provided, however, that any shares subject to redemption must have been issued
at least one year prior to the date of such redemption notice.
For each share of Increasing Rate Preferred Stock to be redeemed, the
Company must pay on the Redemption Date an amount equal to the sum of (i) 110%
of the Liquidation Value of such share as of such Redemption Date plus (ii)
all accrued and unpaid dividends (whether or not earned or declared) on such
share as of such Redemption Date. In the event the Company is required to
redeem shares of the Increasing Rate Preferred
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Stock but does not have sufficient funds legally available to redeem all such
shares, the Company must apply the funds it does have legally available to
redeem on a ratable basis as many shares subject to redemption as is possible.
If the Company fails to redeem all shares required to be redeemed by it on any
given Redemption Date because of insufficient legally available funds, the
holders of Increasing Rate Preferred Stock will be able to exercise the
Special Voting Right described below.
EXCHANGE. The Company may, at its option, exchange shares of Common Stock on
any Dividend Payment Date (an "Exchange Date") for any or all shares of
Increasing Rate Preferred Stock outstanding on such Exchange Date (each, an
"Exchange"), provided that in connection with such Exchange, (i) the Company
delivers an exchange notice at least 30 but not more than 60 days prior to
such Exchange Date and (ii) on the Exchange Date, the Company pays each holder
of the shares of Increasing Rate Preferred Stock to be exchanged an amount
equal to all accrued but unpaid dividends on such shares to such Exchange
Date. The number of shares of Common Stock to be exchanged for each share of
Increasing Rate Preferred Stock will be a number equal to the Liquidation
Value divided by the Current Share Value on the last day of the Dividend
Period immediately preceding the Exchange Date. If, in connection with an
Exchange, the Company intends to exchange fewer than all the outstanding
shares of Increasing Rate Preferred Stock, the number of shares of Increasing
Rate Preferred Stock to be exchanged will be determined ratably among the
holders of such stock according to the respective number of shares held by
them.
LIQUIDATION. The holders of shares of Increasing Rate Preferred Stock will
be entitled to receive in the event of any liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary, the Liquidation Value for
each share of Increasing Rate Preferred Stock (the "Liquidation Preference"),
and no more.
Until the holders of the Increasing Rate Preferred Stock have been paid the
Liquidation Preference in full, no payment may be made to any holder of Junior
Liquidation Stock upon the liquidation, dissolution or winding up of the
Company. If, upon any liquidation, dissolution or winding up of the Company,
the assets of the Company, or any proceeds thereof, distributable among the
holders of the shares of Increasing Rate Preferred Stock are insufficient to
pay in full the Liquidation Preference, then such assets, or the proceeds
thereof, will be distributed among the holders of shares of Increasing Rate
Preferred Stock ratably in accordance with the respective amounts which would
be payable on such shares of Increasing Rate Preferred Stock if all amounts
payable thereon were paid in full. Neither a merger or consolidation of the
Company with or into another entity nor a voluntary sale, lease, conveyance,
exchange or transfer of all or substantially all of the Company's assets
(except in connection with a plan of liquidation, dissolution or winding up of
the Company) will be considered a liquidation, dissolution or winding up,
voluntary or involuntary, of the Company.
VOTING RIGHTS. Except as described below, or except as otherwise from time
to time required by applicable law, the holders of shares of Increasing Rate
Preferred Stock will have no voting rights.
Whenever (i) any accrued but unpaid dividends on the Increasing Rate
Preferred Stock (whether or not earned or declared) are in arrears for at
least one Dividend Period, (ii) the Company fails to effect any redemption
described above or (iii) the Company fails to effect any Exchange, then (x)
the number of directors then constituting the Board of Directors of the
Company will be increased by one and (y) the holders of shares of Increasing
Rate Preferred Stock, voting separately as a class, will have the exclusive
right (the "Special Voting Right") to elect a director to fill such vacancy
either (1) at a properly called special meeting of the holders of the
Increasing Rate Preferred Stock called for such purpose or (2) at any annual
meeting of stockholders of the Company. Holders of Increasing Rate Preferred
Stock will have the right to exercise the Special Voting Right until such time
as (i) all accumulated dividends on the Increasing Rate Preferred Stock shall
have been paid in full, (ii) all redemptions required to be made on any
Redemption Date shall have been made and (iii) all Exchanges required to be
made shall have been made. In exercising the Special Voting Right, each share
of Increasing Rate Preferred Stock will be entitled to one vote.
In addition, so long as any shares of Increasing Rate Preferred Stock are
outstanding, the consent of the Representatives or the affirmative vote of the
holders of 66 2/3% of the shares of the Increasing Rate Preferred
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Stock is required to issue any preferred stock on parity with or senior to the
Increasing Rate Preferred Stock, amend the articles supplementary relating to
the Increasing Rate Preferred Stock, issue or take certain actions affecting
the Increasing Rate Preferred Stock or make distributions with respect to
stock on parity with or junior to the Increasing Rate Preferred Stock.
TRANSFER AGENT AND REGISTRAR. The transfer agent and registrar for the
Increasing Rate Preferred Stock will be The Bank of New York, New York, New
York.
JUNIOR PREFERRED STOCK
GENERAL. On February 22, 1996, the Board of Directors of the Company
authorized the Company to classify and issue 37,362 shares of the Junior
Preferred Stock as part of the 50,000,000 shares of authorized Preferred
Stock.
In connection with the Hughes Acquisition, one share of Junior Preferred
Stock was issued to a wholly-owned subsidiary of the Company and is currently
outstanding.
RANKING. The Junior Preferred Stock ranks senior to the Common Stock and
junior to all other Preferred Stock (unless the terms of such Preferred Stock
specifically provide that it will rank junior to or on parity with the Junior
Preferred Stock), with respect to payment of dividends and amounts upon
liquidation, dissolution or winding up.
DIVIDENDS. Holders of shares of Junior Preferred Stock are entitled to
receive for each such share, when and as declared by the Board of Directors of
the Company, out of funds of the Company legally available for payment, a
cumulative annual cash dividend equal to the greater of (i) 10.25% of the
liquidation preference of such Junior Preferred Stock (the "Liquidation
Preference") or (ii) the lesser of 200% of the amount determined under clause
(i) above or the Liquidation Preference divided by the average closing price
of Common Stock used to determine the exchange ratio in connection with the
Hughes Acquisition (the "Multiplier") multiplied by the aggregate per share
amount of all cash and non-cash dividends (other than dividends payable in
Common Stock), subject to adjustment for stock splits, combinations and
dividends on the Common Stock. Accumulations of dividends on shares of Junior
Preferred Stock will not bear interest.
Until all accumulated dividends are paid in full, the Company may not,
without first obtaining the consent of the holders of at least 66 2/3% of the
outstanding shares of Junior Preferred Stock, (i) declare or pay dividends on
or make any other distribution on, or redeem or purchase or otherwise acquire
for consideration any shares of the Company's capital stock ranking junior to
the Junior Preferred Stock (other than such shares acquired in exchange for
other shares of the Company's capital stock ranking junior to the Junior
Preferred Stock), (ii) declare or pay dividends on or make any other
distributions on any shares of the Company's capital stock ranking on parity
with the Junior Preferred Stock other than dividends payable ratably on the
Junior Preferred Stock and any other parity stock or (iii) redeem or purchase
or otherwise acquire for consideration any shares of the Company's capital
stock ranking on a parity with the Junior Preferred Stock, except pursuant to
an offer that treats fairly and equitably all holders of Junior Preferred
Stock and such parity stock.
REDEMPTION. The Junior Preferred Stock is not subject to redemption.
LIQUIDATION. The holders of shares of Junior Preferred Stock are entitled to
receive in the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, a liquidation preference for each
share of Junior Preferred Stock equal to the greater of (i) the sum of
$4,148.60 plus all accrued and unpaid dividends on such share to the date of
payment and (ii) an amount equal to the Multiplier multiplied by the aggregate
per share amount to be distributed to holders of Common Stock in connection
with such liquidation, dissolution or winding up, in each case subject to
adjustment for stock splits, combinations and dividends on the Common Stock.
Until the holders of the Junior Preferred Stock have been paid their aggregate
liquidation preference in full, no payment will be made to (i) any holder of
the Company's capital stock ranking
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on a parity with the Junior Preferred Stock, except distributions made ratably
on the Junior Preferred Stock and any stock ranking on parity therewith or
(ii) any holder of the Company's capital stock ranking junior to the Junior
Preferred Stock.
VOTING RIGHTS. Except as otherwise from time to time required by applicable
law, the holders of shares of Junior Preferred Stock have no voting rights;
however, when dividends are in arrears, a vote of 66 2/3% of the outstanding
shares is required for the Company to pay distributions on or redeem any stock
junior to or on parity with the Junior Preferred Stock.
CONSOLIDATION, MERGER. In the event of a merger, consolidation or other
transaction in which shares of Common Stock are exchanged for cash, stock,
securities or other property, holders of Junior Preferred Stock are entitled
to receive for each share of their stock the per share consideration received
by holders of Common Stock multiplied by the Multiplier, subject to adjustment
for stock splits, combinations and dividends on the Common Stock.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by the Prospectus Supplement (the "Offered Debt Securities") and the
extent, if any, to which such general provisions may apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating
to such Offered Debt Securities.
The Offered Debt Securities are to be issued under an Indenture (the
"Indenture") between the Company and The First National Bank of Chicago, as
trustee (the "Trustee"), a copy of which Indenture is filed as an exhibit to
the Registration Statement. The following summaries of certain provisions of
the Indenture and the Debt Securities do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all
provisions of the Indenture, including the definitions therein of certain
terms and of those terms made a part thereof by the Trust Indenture Act.
Wherever particular provisions or defined terms of the Indenture are referred
to, such provisions or defined terms are incorporated herein by reference.
Certain defined terms in the Indenture are capitalized herein.
GENERAL
The Debt Securities will be unsecured obligations of the Company.
The Debt Securities to be offered by this Prospectus are limited to
$500,000,000 in aggregate issue price. The Indenture does not limit the amount
of Debt Securities that may be issued thereunder and provides that Debt
Securities may be issued thereunder from time to time in one or more series.
All Debt Securities of one series need not be issued at the same time and,
unless otherwise provided, a series may be reopened, without the consent of
any Holder, for issuances of additional Debt Securities of such series.
(Section 301) The Indenture provides that there may be more than one Trustee
thereunder, each with respect to one or more series of Debt Securities.
Reference is made to the Prospectus Supplement relating to the Offered Debt
Securities for the following terms, where applicable, of the Offered Debt
Securities: (1) the title of the Offered Debt Securities or series of which
they are a part; (2) any limit on the aggregate principal amount of the
Offered Debt Securities; (3) the date or dates, or the method or methods, if
any, by which such date or dates shall be determined, on which the principal
of such Offered Debt Securities will be payable; (4) the rate or rates (which
may be fixed, floating or adjustable) at which the Offered Debt Securities
will bear interest, if any, the date or dates from which such interest will
accrue, the Interest Payment Dates on which any such interest will be payable
and the Regular Record Date for any such interest payable on any Interest
Payment Date; (5) the place or places where the principal of and any premium
and interest on such Offered Debt Securities will be payable; (6) the period
or periods within which, the price or prices at which and the terms and
conditions upon which such Offered Debt
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Securities may be redeemed, in whole or in part, at the option of the Company;
(7) the obligation, if any, of the Company to redeem or purchase any of such
Offered Debt Securities pursuant to any sinking fund or analogous provisions
or at the option of a Holder thereof, and the period or periods within which,
the price or prices at which and the terms and conditions on which any of such
Offered Debt Securities will be redeemed or purchased, in whole or in part,
pursuant to any such obligation; (8) the denominations in which such Offered
Debt Securities will be issuable, if other than denominations of $1,000 and
any integral multiple thereof; (9) if other than the currency of the United
States of America, the currency, currencies or currency units in which the
principal of or any premium or interest on such Offered Debt Securities will
be payable (and the manner in which the equivalent of the principal amount
thereof in the currency of the United States of America is to be determined
for any purpose, including for the purpose of determining the principal amount
deemed to be outstanding at any time); (10) if the amount of payments of
principal of or any premium or interest on such Offered Debt Securities may be
determined with reference to an index or pursuant to a formula, the manner in
which such amounts will be determined; (11) if the principal of or any premium
or interest on such Securities is to be payable, at the election of the
Company or a Holder thereof, in one or more currencies or currency units other
than those in which the Offered Debt Securities are stated to be payable, the
currency, currencies or currency units in which payment of any such amount as
to which such election is made will be payable, and the periods within which
and the terms and conditions upon which such election is to be made; (12) if
other than the principal amount thereof, the portion of the principal amount
of such Offered Debt Securities which will be payable upon declaration of
acceleration of the Maturity thereof; (13) if applicable, that such Offered
Debt Securities are defeasible as provided in the Indenture; (14) whether such
Offered Debt Securities are convertible into or exchangeable for Common Stock,
Preferred Stock or other Securities and the terms and conditions upon which
such conversion or exchange will be effected; (15) whether such Offered Debt
Securities will be issuable in whole or in part in the form of one or more
Global Securities and, if so, the Depositary or Depositaries for such Global
Security or Global Securities and any circumstances other than those described
under "Global Securities" in which any such Global Security may be transferred
to, and registered and exchanged for Securities registered in the name of a
Person other than the Depositary for such Global Security or a nominee thereof
and in which any such transfer may be registered; (16) any addition to, or
modification or deletion of, any Events of Default or covenants provided for
with respect to the Offered Debt Securities; (17) the terms, if any, pursuant
to which the Offered Debt Securities will be made subordinate and subject in
right of payment to the prior payment in full of all Senior Indebtedness of
the Company, and the definition of any such Senior Indebtedness; and (18) any
other terms of such Securities not inconsistent with the provisions of the
Indenture. (Section 301)
Unless otherwise indicated in the Prospectus Supplement relating to Offered
Debt Securities, principal of and any premium or interest on the Debt
Securities will be payable, and the Debt Securities will be exchangeable and
transfers thereof will be registrable, at the office of the Trustee at its
principal executive offices (see "Concerning the Trustee"), provided that, at
the option of the Company, payment of interest may be made by check mailed to
the address of the Person entitled thereto as it appears in the Security
Register. (Sections 301, 305 and 1002). Any payment of principal and any
premium or interest required to be made on an Interest Payment Date,
Redemption Date or at Maturity which is not a Business Day need not be made on
such date, but may be made on the next succeeding Business Day with the same
force and effect as if made on the Interest Payment Date, Redemption Date or
at Maturity, as the case may be, and no interest shall accrue for the period
from and after such Interest Payment Date, Redemption Date or Maturity.
(Section 113)
Unless otherwise indicated in the Prospectus Supplement relating to Offered
Debt Securities, the Debt Securities will be issued only in fully registered
form, without coupons, in denominations of $1,000 or any integral multiple
thereof. (Section 302). No service charge will be made for any transfer or
exchange of the Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. (Section 305)
Debt Securities may be issued under the Indenture as Original Issue Discount
Securities (as defined below) to be offered and sold at a substantial discount
from their stated principal amount. In addition, under Treasury Regulations it
is possible that Debt Securities which are offered and sold at their stated
principal amount would,
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under certain circumstances, be treated as issued at an original issue
discount for federal income tax purposes. Federal income tax consequences and
other special considerations applicable to any such Original Issue Discount
Securities (or other Debt Securities treated as issued at an original issue
discount) will be described in the Prospectus Supplement relating thereto.
"Original Issue Discount Security" means a security, including any security
that does not provide for the payment of interest prior to Maturity, which is
issued at a price lower than the principal amount thereof and which provides
that upon redemption or acceleration of the Stated Maturity thereof an amount
less than the principal amount thereof shall become due and payable. (Section
101)
GLOBAL SECURITIES
The Debt Securities of a series may be issued in the form of one or more
Global Securities that will be deposited with a Depositary or its nominee
identified in the Prospectus Supplement relating to the Offered Debt
Securities. In such a case, one or more Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of Outstanding Debt Securities of the series to be
represented by such Global Security or Securities.
Unless and until it is exchanged in whole or in part for Debt Securities in
definitive registered form, a Global Security may not be registered for
transfer or exchange except as a whole by the Depositary for such Global
Security to a nominee of such Depositary and except in the circumstances
described in the Prospectus Supplement relating to the Offered Debt
Securities. (Sections 204 and 305). The specific terms of the depositary
arrangement with respect to a series of Debt Securities will be described in
the Prospectus Supplement relating to such series.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to Debt
Securities of any series: (a) failure to pay principal of or premium, if any,
on any Debt Security of that series when due; (b) failure to pay any interest
on any Debt Security of that series when due, continued for 30 days; (c)
failure to deposit any sinking fund payment, when due, in respect of any Debt
Security of that series; (d) failure to perform any other covenant of the
Company in the Indenture (other than a covenant included in the Indenture
solely for the benefit of a series of Debt Securities other than that series),
continued for 60 days after written notice as provided in the Indenture; (e)
certain events in bankruptcy, insolvency or reorganization; (f) a default
under any bond, debenture, note, mortgage, indenture or other evidence of
indebtedness for money borrowed by the Company (or by any Subsidiary, the
repayment of which the Company has guaranteed or for which the Company is
directly responsible or liable as obligor or guarantor) having an aggregate
principal amount outstanding of at least $10,000,000, whether such
indebtedness now exists or shall hereafter be created, which default shall
have resulted in such indebtedness being declared due and payable prior to the
date on which it would otherwise have become due and payable, without such
acceleration having been rescinded or annulled within 10 days after written
notice as provided in the Indenture; and (g) any other Event of Default
provided with respect to Debt Securities of that series. (Section 501). No
Event of Default with respect to a particular series of Debt Securities issued
under the Indenture necessarily constitutes an Event of Default with respect
to any other series of Debt Securities issued thereunder.
The Trustee shall, within 90 days after the occurrence of a default with
respect to Debt Securities of any series, give all holders of Debt Securities
of such series then outstanding notice of all uncured defaults known to it
(the term default to mean the events specified above without grace periods),
provided that, except in the case of a default in the payment of principal of
and any premium or interest on any Debt Security of any series, or in the
payment of any sinking fund installment with respect to Debt Securities of any
series, the Trustee shall be protected in withholding such notice if it in
good faith determines that the withholding of such notice is in the interest
of all holders of Debt Securities of such series then outstanding. (Trust
Indenture Act of 1939)
If an Event of Default with respect to Outstanding Debt Securities of any
series shall occur and be continuing, either the Trustee or the Holders of at
least 25% in aggregate principal amount of the Outstanding
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Debt Securities of that series may declare the principal amount (or, if the
Debt Securities of that series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of that
series) of all the Debt Securities of that series to be due and payable
immediately. At any time after a declaration of acceleration with respect to
Debt Securities of any series has been made, but before a judgment or decree
based on acceleration has been obtained, the Holders of a majority in
principal amount of the Outstanding Debt Securities of that series may, under
certain circumstances, rescind and annul such acceleration. (Section 502). For
information as to waiver of defaults, see "Modification and Waiver."
Reference is made to the Prospectus Supplement relating to each series of
Offered Debt Securities which are Original Issue Discount Securities for the
particular provisions relating to acceleration of the Maturity of a portion of
the principal amount of such Original Issue Discount Securities upon the
occurrence of an Event of Default and the continuation thereof.
The Indenture provides that the Trustee will be under no obligation, subject
to the duty of the Trustee during the default to act with the required
standard of care, to exercise any of its rights or powers under the Indenture
at the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee reasonable indemnity. (Section 601). Subject to
such provisions for indemnification of the Trustee, the Holders of a majority
in principal amount of the Outstanding Debt Securities of any series will have
the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee, with respect to the Debt Securities of that series.
(Section 512)
The Company will furnish to the Trustee annually a certificate as to
compliance by the Company with all conditions and covenants under the
Indenture. (Section 1004)
CONSOLIDATION, MERGER AND TRANSFER OF ASSETS
Under the Indenture, the Company may not consolidate with or merge into any
corporation, or transfer its assets substantially as an entirety to any
Person, unless: (i) the successor corporation or transferee assumes the
Company's obligations on the Debt Securities and under the Indenture; (ii)
after giving effect to the transaction, no Event of Default and no event
which, after notice or lapse of time or both, would become an Event of Default
shall have occurred and be continuing; and (iii) certain other conditions are
met. (Section 901)
SATISFACTION, DISCHARGE AND DEFEASANCE
The Prospectus Supplement will state if any defeasance provision will apply
to the Offered Debt Securities.
The Indenture, with respect to any series of Debt Securities (except for
certain specified surviving obligations, including (A) any rights of
registration of transfer and exchange and (B) rights to receive the principal,
premium, if any, and interest on the Debt Securities) will be discharged and
cancelled upon the satisfaction of certain conditions, including the
following: (i) all Debt Securities of such series not theretofore delivered to
the Trustee for cancellation have become due or payable, will become due and
payable at their Stated Maturity within one year or are to be called for
redemption within one year and (ii) the deposit with such Trustee of an amount
in the Specified Currency sufficient to pay the principal, premium, if any,
and interest to the Maturity of all Debt Securities of such series. (Section
501)
If so specified in the Prospectus Supplement with respect to Debt Securities
of any series, the Company at its option, (i) will be discharged from any and
all obligations in respect of the Debt Securities of such series (except for
certain obligations to register the transfer or exchange of Debt Securities of
such series, replace stolen, lost or mutilated Debt Securities of such series,
maintain certain offices or agencies in each Place of Payment and hold moneys
for payment in trust), or (ii) will not be subject to provisions of the
applicable Indenture described above under "--Consolidation, Merger and
Transfer of Assets" with respect to the Debt Securities of such series, in
each case if the Company irrevocably deposits with the Trustee, in trust,
money or U.S. Government Obligations which through the payment of interest
thereon and principal thereof in accordance
14
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with their terms will provide money in an amount sufficient (in the opinion of
independent public accountants) to pay all the principal (including any
mandatory sinking fund payments) of, and premium, if any, and interest on, the
Debt Securities of such series on the dates such payments are due in
accordance with the terms of such Debt Securities. To exercise any such
option, the Company is required to deliver to the applicable Trustee (1) an
opinion of counsel to the effect that (a) the deposit and related defeasance
would not cause the Holders of the Debt Securities of such series to recognize
income, gain or loss for federal income tax purposes, (b) the Company's
exercise of such option will not cause any violation of the Investment Company
Act of 1940, as amended, and (c) if the Debt Securities of such series are
then listed on the NYSE, such Debt Securities would not be delisted as a
result of the exercise of such option and (2) in the case of the Debt
Securities of such series being discharged, a ruling received from or
published by the United States Internal Revenue Service to the effect that the
deposit and related defeasance would not cause the Holders of the Debt
Securities of such series to recognize income, gain or loss for federal income
tax purposes.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in principal amount
of the Outstanding Debt Securities of each series affected by such
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Debt
Security affected thereby, (a) change the Stated Maturity of the principal of,
or any installment of principal of or interest on, any Debt Security, (b)
reduce the principal amount of, or any premium or interest on, any Debt
Security, (c) reduce the amount of principal of an Original Issue Discount
Security or other Security payable upon acceleration of the Maturity thereof,
(d) change the place or currency of payment of principal of, or any premium or
interest on, any Debt Security, (e) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security, (f) reduce
the percentage in principal amount of Outstanding Debt Securities of any
series, the consent of whose Holders is required for modification or amendment
of the Indenture, (g) reduce the percentage in principal amount of Outstanding
Debt Securities of any series necessary for waiver of certain defaults or (h)
modify such provisions with respect to modification and waiver. (Section 902)
The Holders of a majority in principal amount of the Outstanding Debt
Securities of any series may on behalf of the Holders of all Debt Securities
of that series waive any past default under the Indenture with respect to that
series, except a default in the payment of the principal of or premium, if
any, or interest on any Debt Security of that series or in respect of a
provision which under the Indenture cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security of that series
affected. (Section 513)
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the law of the State of New York, but without regard to
principles of conflicts of law. (Section 112)
CONCERNING THE TRUSTEE
The First National Bank of Chicago, a national banking association duly
organized and existing under the laws of the United States of America, with
its principal offices at One First National Plaza, Suite 0126, Chicago,
Illinois 60670, will act as Trustee for the benefit of the Holders of the Debt
Securities under the Indenture. The Trustee also serves as the trustee under
the indenture in respect of (i) the Company's $120,000,000 aggregate principal
amount of 8.5% Notes due January 15, 2003, (ii) the Company's $150,000,000
aggregate issue amount of Medium-Term Notes due Nine Months or More from Date
of Issue and (iii) $141,753,000 aggregate principal amount of 9 1/4% Junior
Subordinated Debentures due 2025. The Company maintains other banking
relationships with the Trustee in the ordinary course of business, including
maintaining a line of credit with and obtaining loans from the Trustee.
15
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell Securities to or through one or more underwriters or
dealers and also may sell Securities directly to institutional investors or
other purchasers, or through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Securities for
whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company and any profit on
the resale of Securities by them may be deemed to be underwriting discounts
and commissions under the Securities Act. Any such underwriter or agent will
be identified, and any such compensation received from the Company will be
described, in the related Prospectus Supplement.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
If so indicated in the related Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Securities from the Company
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the Securities shall not at the time of delivery be prohibited under the laws
of the jurisdiction to which such purchaser is subject. The underwriters and
such other agents will not have any responsibility in respect of the validity
or performance of such contracts.
Certain of the underwriters or agents and their associates may engage in
transactions with and perform services for the Company or its affiliates in
the ordinary course of their respective businesses.
The Securities may or may not be listed on a national securities exchange
(other than the Common Stock, which is listed on the NYSE). Any Common Stock
sold pursuant to a Prospectus Supplement will be listed on the NYSE, subject
to official notice of issuance. No assurances can be given that there will be
an active trading market for the Securities.
EXPERTS
The consolidated financial statements and schedules of the Company and its
subsidiaries as of December 31, 1995 and 1994, and for each of the years in
the three-year period ended December 31, 1995, incorporated by reference in
this Registration Statement have been incorporated by reference in reliance
upon (1) the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein and upon the authority of said
firm as experts in accounting and auditing, and (2) with respect to the
current value basis financial statements, the report of Landauer Associates,
Inc., real estate counselors and consultants, incorporated by reference
herein, and upon the authority of said firm as experts in real estate
consultation.
LEGAL MATTERS
The validity of the Common Stock and the Preferred Stock will be passed upon
for the Company by Piper & Marbury, L.L.P., Baltimore, Maryland. The validity
of the Debt Securities will be passed upon for the Company by Fried, Frank,
Harris, Shriver & Jacobson (a partnership including professional
corporations), New York, New York. Piper & Marbury L.L.P., Baltimore,
Maryland, will serve as counsel for any underwriters and agents. Piper &
Marbury L.L.P. from time to time provides legal services to the Company.
16
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTA-
TIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND ACCOMPANY-
ING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRIT-
ERS. THIS PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES OTHER
THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITA-
TION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OF-
FER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUP-
PLEMENT AND ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH IN-
FORMATION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement
Prospectus Summary....................................................... S-3
Risk Factors............................................................. S-5
The Company.............................................................. S-9
Price Range of Common Stock and Dividends................................ S-19
Use of Proceeds.......................................................... S-19
Capitalization........................................................... S-20
Selected Financial Data.................................................. S-21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... S-23
Description of Series B Preferred Stock.................................. S-31
Certain Income Tax Considerations........................................ S-37
Underwriting............................................................. S-39
Prospectus
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 2
The Company.............................................................. 3
Use of Proceeds.......................................................... 3
Ratio of Earnings to Fixed Charges....................................... 3
Description of Common Stock.............................................. 4
Description of Preferred Stock........................................... 6
Description of Debt Securities........................................... 11
Plan of Distribution..................................................... 16
Experts.................................................................. 16
Legal Matters............................................................ 16
</TABLE>
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4,000,000 Shares
THE ROUSE COMPANY
Series B Convertible
Preferred Stock
(Liquidation Preference
$50.00 Per Share)
------------------------
PROSPECTUS SUPPLEMENT
------------------------
Alex. Brown & Sons
INCORPORATED
Goldman, Sachs & Co.
Merrill Lynch & Co.
February 20, 1997
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