<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 7, 1998
---------------
The Rouse Company
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 0-1743 52-0735512
- -------------------- ----------- ------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
10275 Little Patuxent Parkway
Columbia, Maryland 21044-3456
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (410) 992-6000
--------------
Not Applicable
--------------
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
The Rouse Company (the "Company") previously reported in its Current Report on
Form 8-K filed with the Securities and Exchange Commission on August 13, 1998,
that on April 6, 1998, the Company and Westfield America, Inc. entered into an
agreement to purchase a portfolio of interests in retail centers from TrizecHahn
Centers Inc. ("TrizecHahn"). Under the terms of the agreement, as amended, the
Company has agreed to purchase ownership interests in seven retail centers for
approximately $1.1 billion in a series of transactions to be completed during
the third and fourth quarters of 1998. The agreement is subject to the
satisfaction of certain conditions and includes a provision for the substitution
of, or increase or decrease by TrizecHahn, in the number of retail centers to be
acquired.
On July 31, 1998, a wholly owned subsidiary of the Company purchased from
TrizecHahn retail property assets known as Park Meadows Mall. In a related
transaction on the same date, another wholly owned subsidiary of the Company, in
a joint venture with Westfield America, Inc. ("Westfield"), purchased from
TrizecHahn retail property assets known as Valley Fair. These transactions are
collectively referred to as the First Closing. As a result, Company subsidiaries
now own Park Meadows Mall and a 50% joint venture ownership interest in Valley
Fair. The Company is holding for sale the 50% joint venture ownership interest
in Valley Fair. These purchases were previously reported in the Company's
Current Report on Form 8-K filed with the Securities and Exchange Commission on
August 13, 1998, and the financial statements required by Rule 3-14 of
Regulation S-X and related pro forma financial information of the Company
pursuant to Article 11 of Regulation S-X were previously reported in the
Company's Current Report on Form 8-K/A dated October 9, 1998.
The aggregate purchase price for the Company's interests in the properties in
the First Closing was approximately $445,435,000, including approximately
$252,817,000 paid at closing and approximately $192,618,000 of assumed debt
secured by the properties. The purchase prices were determined by negotiation
between the applicable parties. The Company used available cash to pay
approximately $42,817,000 of the purchase price at closing. The balance of the
purchase price paid at closing of $210,000,000 was provided by borrowings under
the Company's unsecured revolving credit facility.
On October 7, 1998, a wholly owned subsidiary of the Company purchased from
TrizecHahn retail property assets known as Fashion Place. In related
transactions on the same date, other wholly owned subsidiaries purchased from
TrizecHahn a 25% interest in assets known as The Fashion Show (a retail center
in which the Company indirectly owns the remaining 75% ownership interest) and a
58.1% partnership interest in H-N-W Associates, a limited partnership ("HNW").
HNW owns a 35.3% interest in Westdale Associates, a general partnership that
owns retail property assets known as Westdale Mall. As a result, Company
subsidiaries now own a 100% interest in Fashion Place and The Fashion Show, and
through affiliates, a 20.5% interest in Westdale Mall. The Company is holding
for sale the 20.5% interest in Westdale Mall. These transactions are
collectively referred to as the Second Closing. The Company reported
<PAGE>
these transactions in its Current Report on Form 8-K filed with the Securities
and Exchange Commission on October 21, 1998.
On October 22, 1998, a wholly owned subsidiary of the Company purchased from
TrizecHahn retail property assets known as Towson Town Center. As a result, the
Company now has a 100% interest in Towson Town Center. This transaction is
referred to as the Third Closing. The Company reported this transaction in its
Current Report on Form 8-K filed with the Securities and Exchange Commission on
November 5, 1998.
Fashion Place is a regional shopping center in Salt Lake City, Utah and contains
approximately 382,000 square feet of leasable mall space and three department
stores encompassing 566,000 square feet of space. The Fashion Show is a regional
shopping center on the "Strip" in downtown Las Vegas, Nevada and contains
approximately 308,000 square feet of leasable mall space and five department
stores encompassing 532,000 square feet of space. Westdale Mall is a regional
shopping center in Cedar Rapids, Iowa and contains approximately 383,000 square
feet of leasable mall space and four department stores encompassing 471,000
square feet of space. Towson Town Center is a regional shopping center in
Towson, Maryland and contains approximately 536,000 square feet of leasable mall
space and two department stores encompassing 419,000 square feet of space.
Fashion Place, The Fashion Show, Westdale Mall, and Towson Town Center will
continue to operate as regional shopping centers.
The aggregate purchase price for the Company's interests in the properties in
connection with the Second and Third Closings, negotiated between the Company
and TrizecHahn, was approximately $442,713,000, including approximately
$221,987,000 paid at the closings and approximately $220,726,000 of assumed
mortgage debt secured by the properties. The Company used proceeds from
additional mortgage debt secured by one of the properties to pay approximately
$21,000,000 of the purchase price. The balance of the purchase price of
$200,987,000 was funded by borrowings under the Company's unsecured revolving
credit facility. Immediately after closing on Towson Town Center, the Company
repaid $164,876,000 of mortgage debt secured by the property and assumed by a
subsidiary of the Company. The Company used proceeds of $140,000,000 from new
mortgage debt secured by the property, borrowings of $20,000,000 under the
Company's bridge loan credit facility and borrowings of $4,876,000 under the
Company's unsecured revolving credit facility to repay this mortgage debt. The
First National Bank of Chicago and Bankers Trust Company are the lead
underwriters for the bridge loan credit facility and the unsecured revolving
credit facility.
<PAGE>
The Company is filing this Current Report on Form 8-K/A to include financial
statements specified by Rule 3-14 of Regulation S-X of Park Meadows Mall, Valley
Fair, Fashion Place, The Fashion Show, Westdale Mall and Towson Town Center and
related pro forma financial information of the Company.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
The following financial statements and pro forma financial information are filed
as part of this report:
(a) Financial statements of real estate operations acquired specified by Rule 3-
14 of Regulation S-X. See Index to Financial Statements and Pro Forma
Financial Information (page F-1).
(b) Pro forma financial information required pursuant to Article 11 of
Regulation S-X. See Index to Financial Statements and Pro Forma Financial
Information (page F-1).
(c) Exhibits:
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants
23.2 Consent of KPMG Peat Marwick LLP, Independent Accountants
23.3 Consent of KPMG Peat Marwick LLP, Independent Accountants
23.4 Consent of KPMG Peat Marwick LLP, Independent Accountants
<PAGE>
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE ROUSE COMPANY
Date: November 16, 1998 By /s/ Jeffrey H. Donahue
----------------- -------------------------
Jeffrey H. Donahue
Senior Vice-President and
Chief Financial Officer
Date: November 16, 1998 By /s/ George L. Yungmann
----------------- -------------------------
George L. Yungmann
Senior Vice-President and
Controller
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND
PRO FORMA FINANCIAL INFORMATION
The following historical financial statements and pro forma financial
information are presented in accordance with Rule 3-14 and Article 11,
respectively, of Regulation S-X of the Securities and Exchange Commission. The
historical financial statements have been audited only for the respective
properties' most recent fiscal years as the transactions relating to Park
Meadows Mall and the 50% joint venture ownership interest in Valley Fair (as
described in the Company's Current Report on Form 8-K dated August 13, 1998),
Fashion Place, the 25% interest in The Fashion Show, and the 20.5% interest in
Westdale Mall, (as described in the Company's Current Report on Form 8-K dated
October 7, 1998) and Towson Town Center (as described in the Company's Current
Report on Form 8-K dated October 22, 1998) are not with related parties and the
Company, after reasonable inquiry, is not aware of any material factors related
to the properties not otherwise disclosed that would cause the reported
financial information to not be necessarily indicative of future operating
results except as to interest expense related to certain mortgage debt assumed
and new debt issued by the Company to finance the acquisition of these interests
in retail centers and as to related depreciation and amortization. A discussion
of material factors considered by the Company in assessing the properties is
included in the introductory language regarding the pro forma financial
statements on page F-37. In addition, since the properties will be directly or
indirectly owned by entities that intend to elect to be treated as REITs for
Federal income tax purposes, a presentation of estimated taxable operating
results is not applicable.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PARK MEADOWS MALL PROPERTY
- --------------------------
Report of Independent Accountants.................................... F-3
Statement of Revenues and Certain Expenses
for the Year Ended December 31, 1997.............................. F-4
Notes to Statement of Revenues and Certain Expenses.................. F-5
VALLEY FAIR PROPERTY
- --------------------
Report of Independent Accountants.................................... F-9
Statement of Revenues and Certain Expenses
for the Year Ended December 31, 1997.............................. F-10
Notes to Statement of Revenues and Certain Expenses.................. F-11
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FASHION PLACE
- -------------
Report of Independent Accountants.................................... F-15
Statement of Revenues and Certain Expenses
for the Year Ended December 31, 1997.............................. F-16
Notes to Statement of Revenues and Certain Expenses.................. F-17
THE FASHION SHOW
- ----------------
Independent Auditors' Report......................................... F-21
Statement of Revenues and Certain Expenses
for the Year Ended December 31, 1997.............................. F-22
Notes to Statement of Revenues and Certain Expenses.................. F-23
WESTDALE MALL
- -------------
Independent Auditors' Report......................................... F-26
Statement of Revenue and Certain Expenses
for the Year Ended December 31, 1997.............................. F-27
Notes to Statement of Revenue and Certain Expenses................... F-28
TOWSON TOWN CENTER
- ------------------
Independent Auditors' Report......................................... F-32
Statement of Revenue and Certain Expenses
for the Year Ended December 31, 1997.............................. F-33
Notes to Statement of Revenue and Certain Expenses................... F-34
THE ROUSE COMPANY AND SUBSIDIARIES
- ----------------------------------
Introductory language regarding Unaudited Pro Forma
Condensed Consolidated Financial Statements....................... F-37
Pro Forma Condensed Consolidated Balance
Sheet as of June 30, 1998 (unaudited)............................. F-39
Pro Forma Condensed Consolidated Statement
of Operations for the Year Ended December 31, 1997 (unaudited).... F-40
Pro Forma Condensed Consolidated Statement
of Operations for the Six Months ended June 30, 1998 (unaudited).. F-41
Notes to Pro Forma Condensed Consolidated Financial
Statements (unaudited)............................................ F-42
</TABLE>
F-2
<PAGE>
Report of Independent Accountants
---------------------------------
The Board of Directors
of The Rouse Company
We have audited the accompanying statement of revenues and certain expenses for
the year ended December 31, 1997 of the Park Meadows Mall Property, as defined
in Note 1, which is intended to be acquired by The Rouse Company. This statement
is the responsibility of the management of TrizecHahn Centers Inc. Our
responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the statement. We believe that our audit
provides a reasonable basis for our opinion.
As described in Note 2, this statement excludes certain expenses that would not
be comparable with those resulting from the operations of the Park Meadows Mall
Property after acquisition by The Rouse Company. The accompanying statement was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission Rule 3-14 of Regulation S-X and is not
intended to be a complete presentation of the Park Meadows Mall Property's
revenues and expenses.
In our opinion, the statement referred to above presents fairly, in all material
respects, the revenues and certain expenses described in Note 2, of the Park
Meadows Mall Property for the year ended December 31, 1997, in conformity with
generally accepted accounting principles.
PricewaterhouseCoopers LLP
Newport Beach, California
June 15, 1998
F-3
<PAGE>
PARK MEADOWS MALL PROPERTY
STATEMENT OF REVENUES AND CERTAIN EXPENSES
OF THE PARK MEADOWS MALL PROPERTY
TO BE ACQUIRED BY THE ROUSE COMPANY
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Revenues:
Minimum rent $15,062,127
Overage rent 740,139
Carts and temporary tenant rents 1,029,382
Recoveries from tenants 9,409,368
Other income 322,079
Public improvement fee revenue 4,759,236
-----------
31,322,331
-----------
Certain expenses:
Operating expenses 5,586,128
Property taxes 3,707,665
Promotion 43,937
Professional services 72,743
Interest expense 1,731,195
Other expenses 279,981
-----------
11,421,649
-----------
Revenues in excess of certain expenses $19,900,682
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
PARK MEADOWS MALL PROPERTY
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. Organization:
The accompanying statement of revenues and certain expenses (the "Statement")
of the Park Meadows Mall Property, as defined herein, relates to the
operations of a regional shopping center, Park Meadows Mall, located in
Douglas County, Colorado (the "Park Meadows Mall Property" or "Property"),
which is owned by Park Meadows Mall, Ltd., a Colorado limited partnership
(the "Partnership") and is managed by TrizecHahn Centers Management Inc.
("THCMI"), a wholly owned subsidiary of TrizecHahn Centers Inc. ("THCI"). The
Property is intended to be sold to The Rouse Company ("Rouse") in a single
transaction subject to, among other things, an executed Asset Purchase
Agreement between THCI and Rouse.
The Partnership was formed to develop and operate the Property which opened
on August 30, 1996. The partnership agreement provides that the Partnership
shall continue until November 2043, unless terminated earlier. The
Partnership interests at December 31, 1997 are as follows:
Hahn Park Meadows Mall, Inc. 75%
Trizec Colorado, Inc. 25%
Hahn Park Meadows Mall, Inc. and Trizec Colorado, Inc. are effectively wholly
owned by THCI.
2. Summary of Significant Accounting Policies:
The following are significant accounting policies followed in the preparation
of the accompanying Statement. This Statement and notes are representations
of THCI and THCMI, whose managements are responsible for their integrity and
objectivity.
Basis of Presentation:
---------------------
The accompanying Statement is presented on the accrual basis of accounting in
conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission. Accordingly, it is not representative of the actual operations
for the period presented because certain expenses, which may not be
comparable to those expected to be incurred by Rouse in the proposed future
operations of the Property, have been excluded. Expenses excluded consist of
depreciation and amortization, management and leasing fees and mortgage
interest.
F-5
<PAGE>
PARK MEADOWS MALL PROPERTY
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
2. Summary of Significant Accounting Policies, Continued:
Rental Revenue:
--------------
The Partnership recognizes scheduled minimum rent increases on a straight-
line basis. Overage rents, which are based upon the level of sales achieved
by the lessee, are recognized on an accrual basis. Recoveries from tenants
for real estate taxes, insurance and certain other shopping center operating
expenses are recognized as revenue in the period the applicable costs are
incurred.
Lease Fees:
----------
Payments received from tenants in connection with early termination of a
tenant lease are recognized as income when received.
Maintenance and Repairs:
-----------------------
Maintenance and repairs are charged to operations as incurred.
Use of Estimates:
----------------
The Partnership has made a number of estimates and assumptions relating to
the reported amounts of revenue and expenses during the reporting period to
prepare this Statement in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
3. Public Improvement Fee Revenue:
The Partnership issued bonds for the purpose of financing public
infrastructure improvements. In connection with the bond issue, a trust fund
was established to oversee the dispersal of bond proceeds and the repayment
of the bond issue. The bond repayment is funded by a Public Improvement Fee
("PIF") assessed on the retail sales of each store in the shopping center and
is remitted directly to the trustee, Norwest Bank. The Statement includes PIF
revenue of $4,759,236, interest income earned on undisbursed bond proceeds of
$109,586 and interest expense of $1,731,195.
F-6
<PAGE>
PARK MEADOWS MALL PROPERTY
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
4. Commitments and Contingencies:
Partnership as Lessor:
---------------------
The Partnership leases space to tenants in the shopping center for which it
charges minimum rents and receives reimbursement for real estate taxes,
insurance and certain other shopping center operating expenses. The terms of
the leases vary with the tenants, and the majority of the leases also provide
for additional overage rents during any year in which a tenant's gross sales
exceed a stated amount.
Future minimum rents to be received under leases in effect at December 31,
1997 are as follows:
<TABLE>
<CAPTION>
Years Ending December 31,
- -------------------------
<S> <C>
1998 $ 14,129,880
1999 16,161,609
2000 16,183,400
2001 16,206,313
2002 15,794,393
thereafter 94,053,840
------------
$172,529,435
============
</TABLE>
Legal:
-----
The Partnership is, from time to time, involved in various claims and legal
actions arising in the ordinary course of business. Although the final
outcome of these legal matters cannot be determined, it is management's
opinion, based in part upon advice from legal counsel, that the final
resolution of these matters will not have a material adverse effect on the
Partnership's results of operations.
F-7
<PAGE>
PARK MEADOWS MALL PROPERTY
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
5. Related-Party Transactions:
THCI and THCMI provide payroll, professional and various legal services to
the Partnership.
A summary of related-party costs and fees incurred for the year ended
December 31, 1997 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Payroll and related benefits $1,754,517
Development fees 101,155
Professional services 14,020
Legal fees 56,678
----------
$1,926,370
==========
</TABLE>
F-8
<PAGE>
Report of Independent Accountants
---------------------------------
The Board of Directors
of The Rouse Company
We have audited the accompanying statement of revenues and certain expenses for
the year ended December 31, 1997 of the Valley Fair Property, as defined in
Note 1, which is intended to be acquired by The Rouse Company and Westfield
America, Inc., in a joint venture. This statement is the responsibility of the
management of TrizecHahn Centers Inc. Our responsibility is to express an
opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the statement. We believe that our audit
provides a reasonable basis for our opinion.
As described in Note 2, this statement excludes certain expenses that would not
be comparable with those resulting from the operations of the Valley Fair
Property after acquisition by The Rouse Company and Westfield America, Inc. The
accompanying statement was prepared for the purpose of complying with the rules
and regulations of the Securities and Exchange Commission Rule 3-14 of
Regulation S-X and is not intended to be a complete presentation of the Valley
Fair Property's revenues and expenses.
In our opinion, the statement referred to above presents fairly, in all material
respects, the revenues and certain expenses described in Note 2, of the Valley
Fair Property for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
PricewaterhouseCoopers LLP
Newport Beach, California
June 15, 1998
F-9
<PAGE>
VALLEY FAIR PROPERTY
STATEMENT OF REVENUES AND CERTAIN EXPENSES
OF THE VALLEY FAIR PROPERTY
TO BE ACQUIRED BY THE ROUSE COMPANY AND WESTFIELD AMERICA, INC.
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Revenues:
Minimum rent $15,827,632
Overage rent 1,719,478
Carts and temporary tenant rents 848,286
Recoveries from tenants 6,243,693
Other income 417,482
-----------
25,056,571
-----------
Certain expenses:
Operating expenses 4,205,839
Property taxes 1,417,352
Office and management 180,690
Promotion 27,770
Professional services 63,926
Other expenses 14,748
-----------
5,910,325
-----------
Revenues in excess of certain expenses $19,146,246
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-10
<PAGE>
VALLEY FAIR PROPERTY
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. Organization:
The accompanying statement of revenues and certain expenses (the "Statement")
of the Valley Fair Property, as defined herein, relates to the operations of
a regional shopping center, Valley Fair, located in San Jose, California (the
"Valley Fair Property" or "Property"), which is owned by Stevens Creek
Associates, a partnership (the "Partnership") and is managed by TrizecHahn
Centers Management Inc. ("THCMI"), a wholly owned subsidiary of one of the
partners, TrizecHahn Centers Inc. ("THCI"). The ownership interest of THCI in
the Partnership is intended to be sold to The Rouse Company ("Rouse") and
Westfield America, Inc. ("Westfield") in a single transaction subject to,
among other things, an executed Asset Purchase Agreement between THCI, Rouse
and Westfield.
The Statement includes the accounts of the Partnership and its wholly owned
subsidiary, Hahn Issuing Corporation. Hahn Issuing Corporation ("Subsidiary")
is a Delaware corporation formed in 1986 solely for the purpose of issuing
commercial paper to private investors under the Partnership's Credit
Agreement with a commercial bank. All significant intercompany balances and
transactions have been eliminated.
The Partnership is a California general partnership formed for the purpose of
improving, renovating and integrating two existing shopping centers, known as
"Valley Fair Shopping Center," located in San Jose, California, and "Stevens
Creek Plaza," located in the cities of San Jose and Santa Clara, California,
into a regional shopping center known as "Valley Fair." The Partnership
agreement provides that the Partnership is to continue until December 31,
2024 unless terminated earlier.
The general partners and their respective interests are as follows:
THCI 33.33%
RT-H Corporation ("RT-H") 16.67%
Valley Fair Associates, L.P. ("VFA") 50.00%
RT-H is effectively wholly owned by THCI.
F-11
<PAGE>
VALLEY FAIR PROPERTY
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
2. Summary of Significant Accounting Policies:
The following are significant accounting policies followed in the preparation
of the accompanying Statement. This Statement and notes are representations
of THCI and THCMI, whose managements are responsible for their integrity and
objectivity.
Basis of Presentation:
---------------------
The accompanying Statement is presented on the accrual basis of accounting in
conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission. Accordingly, it is not representative of the actual operations
for the period presented because certain expenses, which may not be
comparable to those expected to be incurred by Rouse and Westfield in the
proposed future operations of the Property, have been excluded. Expenses
excluded consist of depreciation and amortization, management and leasing
fees and mortgage interest.
Rental Revenue:
--------------
The Partnership recognizes scheduled minimum rent increases on a straight-
line basis. Overage rents, which are based upon the level of sales achieved
by the lessee, are recognized on an accrual basis. Recoveries from tenants
for real estate taxes, insurance and certain other shopping center operating
expenses are recognized as revenue in the period the applicable costs are
incurred.
Lease Fees:
----------
Payments received from tenants in connection with early termination of a
tenant lease are recognized as income when received.
Maintenance and Repairs:
-----------------------
Maintenance and repairs are charged to operations as incurred.
Use of Estimates:
----------------
The Partnership has made a number of estimates and assumptions relating to
the reported amounts of revenue and expenses during the reporting period to
prepare this Statement in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
F-12
<PAGE>
VALLEY FAIR PROPERTY
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
3. Commitments and Contingencies:
Partnership as Lessor:
---------------------
The Partnership leases space to tenants in the shopping center for which it
charges minimum rents and receives reimbursement for real estate taxes,
insurance and certain other shopping center operating expenses. The terms of
the leases vary with the tenants, and the majority of the leases also provide
for additional overage rents during any year in which a tenant's gross sales
exceed a stated amount.
Future minimum rents to be received under leases in effect at December 31,
1997 are as follows:
<TABLE>
<CAPTION>
Years Ending December 31,
- -------------------------
<S> <C>
1998 $ 16,071,655
1999 15,031,985
2000 13,861,335
2001 13,277,659
2002 11,975,001
thereafter 39,452,957
------------
$109,670,592
============
</TABLE>
Legal:
-----
The Partnership is, from time to time, involved in various claims and legal
actions arising in the ordinary course of business. Although the final
outcome of these legal matters cannot be determined, it is management's
opinion, based in part upon advice from legal counsel, that the final
resolution of these matters will not have a material adverse effect on the
Partnership's results of operations.
F-13
<PAGE>
VALLEY FAIR PROPERTY
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
4. Related-Party Transactions:
THCI and THCMI provide payroll, professional and various legal services to
the Partnership.
A summary of related-party costs and fees incurred for the year ended
December 31, 1997 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Payroll and related benefits $1,573,626
Development fees 444,790
Professional services 522,633
Legal fees 129,655
----------
$2,670,704
==========
</TABLE>
F-14
<PAGE>
Report of Independent Accountants
---------------------------------
The Board of Directors
of The Rouse Company
We have audited the accompanying statement of revenues and certain expenses for
the year ended December 31, 1997 of the Fashion Place Property, as defined in
Note 1, which is intended to be acquired by The Rouse Company. This statement is
the responsibility of the management of TrizecHahn Centers Inc. Our
responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the statement. We believe that our audit
provides a reasonable basis for our opinion.
As described in Note 2, this statement excludes certain expenses that would not
be comparable with those resulting from the operations of the Fashion Place
Property after acquisition by The Rouse Company. The accompanying statement was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission Rule 3-14 of Regulation S-X and is not
intended to be a complete presentation of the Fashion Place Property's revenues
and expenses.
In our opinion, the statement referred to above presents fairly, in all material
respects, the revenues and certain expenses described in Note 2, of the Fashion
Place Property for the year ended December 31, 1997, in conformity with
generally accepted accounting principles.
PricewaterhouseCoopers LLP
Newport Beach, California
June 19, 1998
F-15
<PAGE>
FASHION PLACE PROPERTY
STATEMENT OF REVENUES AND CERTAIN EXPENSES
OF THE FASHION PLACE PROPERTY
TO BE ACQUIRED BY THE ROUSE COMPANY
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Revenues:
Minimum rent $ 6,807,740
Overage rent 355,651
Carts and temporary tenant rents 832,117
Recoveries from tenants 3,443,955
Other income 147,793
-----------
11,587,256
-----------
Certain expenses:
Operating expenses 2,385,158
Property taxes 756,072
Promotion 27,756
Professional services 68,268
Ground rent 29,700
Other expenses 211,457
-----------
3,478,411
-----------
Revenues in excess of certain expenses $ 8,108,845
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-16
<PAGE>
FASHION PLACE PROPERTY
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. Organization:
The accompanying statement of revenues and certain expenses (the "Statement")
of the Fashion Place Property, as defined herein, relates to the operations
of a regional shopping center, Fashion Place, located in Murray, Utah (the
"Fashion Place Property" or "Property"), which is owned by Fashion Place
Associates, a Utah limited partnership (the "Partnership"), and is managed by
TrizecHahn Centers Management Inc. ("THCMI"), a wholly owned subsidiary of
one of the partners, TrizecHahn Centers Inc. ("THCI"). The Property is
intended to be sold to The Rouse Company ("Rouse") in a single transaction
subject to, among other things, an executed Asset Purchase Agreement between
THCI and Rouse.
The Partnership was formed on May 8, 1969 to develop and operate the
Property. The Partnership agreement provides that the Partnership shall
continue for a term of 50 years, and from year to year until the partners
elect to terminate the Partnership. Profits and losses are shared as follows:
THCI 95%
Roderick Enterprises ("Roderick") 5%
2. Summary of Significant Accounting Policies:
The following are significant accounting policies followed in the preparation
of the accompanying Statement. This Statement and notes are representations
of THCI and THCMI, whose managements are responsible for their integrity and
objectivity.
Basis of Presentation:
---------------------
The accompanying Statement is presented on the accrual basis of accounting in
conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission. Accordingly, it is not representative of the actual operations
for the period presented because certain expenses, which may not be
comparable to those expected to be incurred by Rouse in the proposed future
operations of the Property, have been excluded. Expenses excluded consist of
depreciation and amortization, management and leasing fees and mortgage
interest.
F-17
<PAGE>
FASHION PLACE PROPERTY
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
2. Summary of Significant Accounting Policies, Continued:
Rental Revenue:
--------------
The Partnership recognizes scheduled minimum rent increases on a straight-
line basis. Overage rents, which are based upon the level of sales achieved
by the lessee, are recognized on an accrual basis. Recoveries from tenants
for real estate taxes, insurance and certain other shopping center operating
expenses are recognized as revenue in the period the applicable costs are
incurred.
Lease Fees:
----------
Payments received from tenants in connection with early termination of a
tenant lease are recognized as income when received.
Maintenance and Repairs:
-----------------------
Maintenance and repairs are charged to operations as incurred.
Use of Estimates:
----------------
The Partnership has made a number of estimates and assumptions relating to
the reported amounts of revenue and expenses during the reporting period to
prepare this Statement in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
3. Commitments and Contingencies:
Partnership as Lessor:
---------------------
The Partnership leases space to tenants in the shopping center for which it
charges minimum rents and receives reimbursement for real estate taxes,
insurance, and certain other shopping center operating expenses. The terms of
the leases vary with the tenants, but the majority of the leases also provide
for additional overage rents during any year in which a tenant's gross sales
exceed a stated amount.
F-18
<PAGE>
FASHION PLACE PROPERTY
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
3. Commitments and Contingencies, Continued:
Partnership as Lessor, Continued:
--------------------------------
Future minimum rents to be received under leases in effect at December 31,
1997 are as follows:
<TABLE>
<CAPTION>
Years Ending December 31,
- -------------------------
<S> <C>
1998 $ 6,486,353
1999 5,618,964
2000 4,959,073
2001 4,765,479
2002 4,406,143
thereafter 9,280,945
-----------
$35,516,957
===========
</TABLE>
Partnership as Lessee:
---------------------
The shopping center is situated on six parcels of land. The largest of these
parcels is owned by the Partnership.
The remaining parcels are leased under leases expiring at various dates from
2004 to 2059, plus options for renewal. Total annual rental expense under
these leases is $29,700.
The minimum annual rental payments under the lease are as follows:
<TABLE>
<CAPTION>
Years Ending December 31,
- -------------------------
<S> <C>
1998 $ 29,700
1999 29,700
2000 29,700
2001 29,700
2002 29,700
thereafter 915,800
----------
$1,064,300
==========
</TABLE>
F-19
<PAGE>
FASHION PLACE PROPERTY
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
3. Commitments and Contingencies, Continued:
Legal:
-----
The Partnership is, from time to time, involved in various claims and legal
actions arising in the ordinary course of business. Although the final
outcome of these legal matters cannot be determined, it is management's
opinion, based in part upon advice from legal counsel, that the final
resolution of these matters will not have a material adverse effect on the
Partnership's results of operations.
4. Related-Party Transactions:
THCI and THCMI provide payroll, professional and various legal services to
the Partnership.
A summary of related-party costs and fees incurred for the year ended
December 31, 1997 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Payroll and related benefits $763,243
Professional services 14,270
Legal fees 27,075
--------
$804,588
========
</TABLE>
5. Subsequent Event:
On June 19, 1998, Roderick assigned its 5% interest in the Partnership to
Hahn Capital Corporation, a wholly owned subsidiary of THCI for approximately
$6.2 million.
F-20
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
The Rouse Company
We have audited the accompanying statement of revenues and certain expenses of
The Fashion Show for the year ended December 31, 1997. This statement is the
responsibility of management. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of revenues and certain
expenses. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the statement of revenues and certain expenses. We believe that
our audit provides a reasonable basis for our opinion.
As described in note 2, this statement of revenues and certain expenses excludes
certain expenses that would not be comparable with those resulting from the
proposed future operations of The Fashion Show. The accompanying statement of
revenues and certain expenses was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission Rule 3-14 of
Regulation S-X and is not intended to be a complete presentation of The Fashion
Show's revenues and expenses.
In our opinion, the statement referred to above presents fairly, in all material
respects, the revenues and certain expenses described in note 2, of The Fashion
Show for the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Baltimore, Maryland
September 15, 1998
F-21
<PAGE>
THE FASHION SHOW
Statement of Revenues and Certain Expenses
Year ended December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Revenues:
Minimum rents $12,537,954
Percentage rents 2,112,718
Temporary tenant rents 602,947
Charges for common facilities 3,956,405
Charges for heating, ventilating and air conditioning 525,354
Charges for real estate taxes 202,566
Charges for other recoverable expenses 428,719
Interest income 105,184
Other 140,229
-----------
20,612,076
-----------
Certain expenses:
Management costs:
Management fee 524,212
Other 145,974
General and administrative expenses 435,720
Marketing expenses 62,598
Common facilities expenses 2,956,008
Heating, ventilating and air conditioning expenses 395,688
Real estate taxes 621,949
Other recoverable expenses 377,431
Building maintenance expenses 4,689
Interest 6,230,396
-----------
11,754,665
-----------
Excess of revenues over certain expenses $ 8,857,411
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-22
<PAGE>
THE FASHION SHOW
Notes to Statement of Revenues and Certain Expenses
Year ended December 31, 1997
1. Organization:
The accompanying statement of revenues and certain expenses of The Fashion
Show relates to a retail center in Las Vegas, Nevada which is owned by H-S
Las Vegas Associates (the "Partnership"), a Nevada general partnership. The
partners, holding ownership interests of 75% and 25%, respectively, are
Howard Hughes Properties, Limited Partnership ("HHPLP"), an affiliate of The
Rouse Company and TrizecHahn Centers Inc. ("THCI"). The Rouse Company intends
to acquire THCI's 25% interest in the partnership. Upon acquisition The Rouse
Company will own a 100% indirect interest in the retail center.
2. Summary of Significant Accounting Policies and Other Matters:
(a) Basis of Presentation:
---------------------
The statement of revenues and certain expenses has been prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and, accordingly, is not representative of the actual
operations for the period presented as certain expenses which may not be
comparable to the expenses expected to be incurred by The Rouse Company
in the proposed future operations of the retail center have been
excluded. Expenses excluded consist of depreciation and amortization.
(b) Minimum Rents
-------------
The straight-line basis is used to recognize minimum rent revenues under
leases which provide for varying rents over the terms.
(c) Percentage Rents
----------------
Percentage rent revenues are considered earned when a tenant's sales
exceed the minimum annual sales volume required for percentage rent under
the terms of the lease agreement.
F-23
<PAGE>
THE FASHION SHOW
Notes to Statement of Revenues and Certain Expenses
2. Summary of Significant Accounting Policies, Continued:
(d) Management Costs
----------------
Until February 1997, the Partnership had a management agreement with Hahn
Property Management Corporation (HPMC), wholly owned by THCI. The
agreement provided for an annual management fee to HPMC equal to the
greater of $245,000 or 3-1/2% of "annual cash receipts," as defined, plus
$10,000. The agreement also provided for payment of leasing commissions
to HPMC and reimbursement of certain expenses incurred by HPMC in the
operation of the retail center. Upon termination of the agreement with
HPMC in February 1997, Rouse Fashion Show Management, Inc. (FSMI), wholly
owned by The Rouse Company, assumed responsibility for management of the
retail center. The terms of the management agreement with FSMI were not
finalized until September 4, 1998; however, the management fee, leasing
and expense reimbursement terms of the new agreement are substantially
the same as those of the agreement with HPMC. Accordingly, such expenses
and costs for the period from termination of the agreement with HPMC to
December 31, 1997, were determined on the basis specified in the
agreement with HPMC.
(e) Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
judgments that affect the revenues and expenses recognized during the
reporting period. Actual results could differ from those estimates.
3. Long-term Debt
--------------
Long-term debt is summarized as follows at December 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
Deed of trust note payable $68,827,034
Equipment note payable 876,744
-----------
Total $69,703,778
===========
</TABLE>
The deed of trust note bears interest at 8.76% and is due in monthly
installments of principal and interest of $566,939 to February 2005, at which
time the remaining balance of $61,639,735 is due. The note is secured by a
deed of trust on the retail center and a general assignment of rents under
tenant leases.
F-24
<PAGE>
THE FASHION SHOW
Notes to Statement of Revenues and Certain Expenses
3. Long-term Debt, Continued
-------------------------
The equipment note bears interest at 9.22%, is due in monthly installments of
$19,036 to maturity in July 2001 and is secured by certain equipment.
4. Leases
------
Space in the retail center is leased to approximately 140 tenants. In
addition to minimum rents, the majority of the leases provide for percentage
rents when the tenants' sales volumes exceed stated amounts as well as other
rents which reimburse the Partnership for certain of its operating expenses.
The Partnership leases the land underlying the five major department stores
in the retail center to the store owners. The expiration dates of these
leases range from 2036 to 2056, including all optional renewal periods. The
leases provide for minimum and percentage rents and under terms of a
reciprocal easement agreement, the store owners are also required to
reimburse their allocable shares, as defined, of certain annual operating
expenses of the Partnership.
Minimum rents to be received from tenants under operating leases in effect at
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $11,978,000
1999 11,338,000
2000 10,606,000
2001 9,997,000
2002 9,013,000
thereafter 31,665,000
-----------
$84,597,000
===========
</TABLE>
In connection with the Partnership's acquisition of the land underlying the
retail center from HHPLP, HHPLP assigned to the Partnership the land leases
with the five department store tenants discussed above and entered into an
agreement with the Partnership to pay certain rent deficits. Under terms of
the agreement, if "total rent," as defined, in any calendar year through 2001
is less than $2,520,000, HHPLP is required to pay the shortfall to the
Partnership, provided that there is a cumulative shortfall in total rent from
inception of the agreement. Payments by HHPLP under the agreement are
subject to an aggregate limitation of $1,800,000. At December 31, 1997, no
payments were due from HHPLP under the agreement.
F-25
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors of
The Rouse Company
We have audited the accompanying statement of revenue and certain expenses of
Westdale Mall for the year ended December 31, 1997. This statement is the
responsibility of management. Our responsibility is to express an opinion on
this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statement. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission as described in Note 1 to the statement of revenue and
certain expenses. It is not intended to be a complete presentation of Westdale
Mall's revenue and expenses.
In our opinion, the statement referred to above presents fairly, in all material
respects, the revenue and certain expenses described in Note 1, of Westdale Mall
for the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
San Diego, California
June 8, 1998
F-26
<PAGE>
WESTDALE MALL
Statement of Revenue and Certain Expenses
Year ended December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
<S> <C>
Revenue:
Minimum rent (note 4) $4,952
Overage rent 281
Cart and temporary tenant rent 427
Recoveries from tenants 2,597
Other 165
------
8,422
------
Certain expenses:
Operating expenses 867
Interest 2,231
Payroll and related benefits related party 728
Ground rent related party 1,118
Property taxes 1,317
Management fees related party 293
Leasing commissions related party 39
Professional services 12
Professional services related party 14
Promotion 28
------
6,647
------
Revenue in excess of certain expenses $1,775
======
</TABLE>
See the accompanying notes to the Statement of Revenue and Certain Expenses.
F-27
<PAGE>
WESTDALE MALL
Notes to Statement of Revenue and Certain Expenses
Year ended December 31, 1997
(Dollars in thousands)
1. Organization and Basis of Presentation:
The accompanying statement of revenue and certain expenses relates to the
operations of Westdale Mall (the "Property"), located in Cedar Rapids, Iowa.
The Rouse Company (the "Company") intends to acquire TrizecHahn Centers
Inc's. 58.1% partnership interest in H-N-W Associates, an Iowa limited
partnership ("HNW"), which is a general partner in Westdale Associates, an
Illinois general partnership (the "Partnership"), which owns Westdale Mall.
Westdale Associates is an Illinois general partnership consisting of HNW and
JMB Income Properties, Ltd. VII, an Illinois limited partnership, as co-
general partners formed to develop and operate Westdale Mall, a regional
shopping center. HNW consists of TrizecHahn Centers Inc., the general
partner, and several limited partners. The partnership agreement provides
that Westdale Associates is to continue until December 31, 2029 unless sooner
terminated. Profits and losses are shared as follows:
H-N-W Associates 35.3%
JMB Income Properties, Ltd. VII 64.7%
The accompanying statement of revenue and certain expenses has been prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission and accordingly, is not representative of the actual
results of operations of the Property for the year ended December 31, 1997
due to the exclusion of the following items, which may not be comparable to
the proposed future operations of the Property:
. Depreciation and amortization
. Federal and state income taxes
. Other items not directly related to the proposed future operations of
the Property.
F-28
<PAGE>
WESTDALE MALL
Notes to Statement of Revenue and Certain Expenses
(Dollars in thousands)
2. Summary of Significant Accounting Policies and Practices:
(a) Revenue Recognition:
-------------------
Minimum rent revenue is recognized on a straight-line basis over the
terms of the individual leases. Overage rent, which is based upon the
level of sales achieved by the lessee, and cart and temporary tenant rent
are recognized on an accrual basis. Recoveries from tenants for real
estate taxes, insurance and certain other shopping center operating
expenses are recognized as revenue in the period the applicable costs are
incurred.
(b) Maintenance and Repairs:
-----------------------
Maintenance and repairs are charged to operations as incurred.
(c) Use of Estimates:
----------------
Management has made a number of estimates and assumptions relating to the
reporting and disclosure of revenue and certain expenses during the
reporting period to prepare the statement of revenue and certain expenses
in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
3. Mortgage Notes Payable:
In 1980, the Partnership executed four loans totaling $29,950 secured by the
Property and an assignment of leases and rents. The loans bear interest at
fixed rates ranging from 8.75% to 10.375%, with monthly principal and
interest payments aggregating $235, and are due on various dates from
February 1, 2010 to July 1, 2015. The principal balances of the loans at
December 31, 1997 totaled $24,565.
4. Commitments and Contingencies:
(a) Partnership as Lessor:
---------------------
The Partnership leases space to tenants in the shopping center for which
it charges minimum rent and receives reimbursement for real estate taxes,
insurance and certain other shopping center operating expenses. The
terms
F-29
<PAGE>
WESTDALE MALL
Notes to Statement of Revenue and Certain Expenses
(Dollars in thousands)
4. Commitments and Contingencies, Continued:
(a) Partnership as Lessor, Continued:
--------------------------------
of the leases vary by tenant and range from one to 25 years, and the
majority of the leases also provide for additional overage rents during
any year in which a tenant's gross sales exceed a stated amount.
Future minimum rent revenue to be received under leases in force at
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Years Ending December 31,
- -------------------------
<S> <C>
1998 $ 4,919
1999 4,456
2000 3,524
2001 3,154
2002 2,757
thereafter 10,282
-------
$29,092
=======
</TABLE>
(b) Legal:
-----
The Partnership is, from time to time, involved in various claims and
legal actions arising in the ordinary course of business. Although the
final outcome of these legal matters cannot be determined, it is
management's opinion, based in part on advice of legal counsel, that the
final resolution of these matters will not have a material adverse effect
on the Partnership's financial position, results of operations, or
liquidity.
F-30
<PAGE>
WESTDALE MALL
Notes to Statement of Revenue and Certain Expenses
(Dollars in thousands)
5. Related Party Transactions:
(a) Management:
----------
Affiliates of HNW have provided property management, leasing and various
professional services to the Property. A summary of costs and fees
incurred and expensed for the year ended December 31, 1997 follows:
<TABLE>
<CAPTION>
<S> <C>
Payroll and related benefits $728
Management fees 293
Leasing commissions 39
Professional services 14
</TABLE>
(b) Ground Lease:
------------
The property was developed on land which is leased from HNW. The lease
requires a minimum annual rent payment of $849 plus a participation
percentage of 25% of rent collected which exceeds a specified rent base,
as defined. The lease expires in 2035. The lease further provides that
upon the sale of the Property, the Partnership may require HNW to convey
a portion of the leased land to the purchaser as part of the sale.
Rental expense amounted to $1,118 in 1997. The minimum annual rental
payments under the lease are as follows:
<TABLE>
<CAPTION>
Years Ending December 31, Amount
------------------------- -------
<S> <C>
1998 $ 849
1999 849
2000 849
2001 849
2002 849
thereafter 27,589
-------
$31,834
=======
</TABLE>
F-31
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors of
The Rouse Company
We have audited the accompanying statement of revenue and certain expenses of
Towson Town Center for the year ended December 31, 1997. This statement is the
responsibility of management. Our responsibility is to express an opinion on
this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statement. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission as described in Note 1 to the statement of revenue and
certain expenses. It is not intended to be a complete presentation of Towson
Town Center's revenue and expenses.
In our opinion, the statement referred to above presents fairly, in all material
respects, the revenue and certain expenses as described in Note 1, of Towson
Town Center for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
San Diego, California
June 8, 1998
F-32
<PAGE>
TOWSON TOWN CENTER
Statement of Revenue and Certain Expenses
Year ended December 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
Revenue:
Minimum rent (note 3) $15,240
Overage rent 277
Cart and temporary tenant rent 1,312
Recoveries from tenants 7,068
Other 496
-------
24,393
-------
Certain expenses:
Operating expenses 3,942
Payroll and related benefits related party 1,604
Property taxes 1,359
Management fees related party 698
Leasing commissions related party 131
Professional services 50
Professional services related party 31
Promotion 27
-------
7,842
-------
Revenue in excess of certain expenses $16,551
=======
</TABLE>
See the accompanying notes to this Statement of Revenue and Certain Expenses.
F-33
<PAGE>
TOWSON TOWN CENTER
Notes to Statement of Revenue and Certain Expenses
Year ended December 31, 1997
(Dollars in thousands)
1. Basis of Presentation:
The accompanying statement of revenue and certain expenses relates to the
operations of Towson Town Center (the "Property"), located near Baltimore,
Maryland. The Rouse Company (the "Company") intends to acquire the Property
from Towson Town Center Associates (the "Partnership").
The accompanying statement of revenue and certain expenses has been prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission and accordingly, is not representative of the actual
results of operations of the Property for the year ended December 31, 1997
due to the exclusion of the following items, which may not be comparable to
the proposed future operations of the Property:
. Depreciation and amortization
. Interest in mortgages which will not be assumed by the Company
. Federal and state income taxes
. Other items not directly related to the proposed future operations of
the Property.
2. Summary of Significant Accounting Policies and Practices:
(a)Revenue Recognition:
-------------------
Minimum rent revenue is recognized on a straight-line basis over the terms
of the individual leases. Overage rent, which is based upon the level of
sales achieved by the lessee, and cart and temporary tenant rent are
recognized on an accrual basis. Recoveries from tenants for real estate
taxes, insurance and certain other shopping center operating expenses are
recognized as revenue in the period the applicable costs are incurred.
(b)Maintenance and Repairs:
-----------------------
Maintenance and repairs are charged to operations as incurred.
F-34
<PAGE>
TOWSON TOWN CENTER
Notes to Statement of Revenue and Certain Expenses
(Dollars in thousands)
2. Summary of Significant Accounting Policies and Practices, Continued:
(c)Use of Estimates:
----------------
Management has made a number of estimates and assumptions relating to the
reporting and disclosure of revenue and certain expenses during the
reporting period to prepare the statement of revenue and certain expenses
in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
3. Commitments and Contingencies:
(a)Shopping Center Leases:
----------------------
Shopping center space is leased to tenants under various operating leases
with terms ranging primarily from two to 20 years. The leases generally
provide for minimum rent and reimbursement of real estate taxes, insurance
and certain other operating expenses. The majority of the leases also
provide for additional overage rent during any year in which a tenant's
gross sales exceed a stated amount.
Future minimum rent revenue to be received under leases in force at
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Years Ending December 31,
- -------------------------
<S> <C>
1998 $15,738
1999 15,592
2000 15,332
2001 14,991
2002 9,976
thereafter 25,895
-------
$97,524
=======
</TABLE>
F-35
<PAGE>
TOWSON TOWN CENTER
Notes to Statement of Revenue and Certain Expenses
(Dollars in thousands)
3. Commitments and Contingencies, Continued:
(b)Legal:
-----
The Property is, from time to time, involved in various claims and legal
actions arising in the ordinary course of business. Although the final
outcome of these legal matters cannot be determined, it is management's
opinion, based in part on advice of legal counsel, that the final
resolution of these matters will not have a material adverse effect on the
Property's results of operations.
4. Related Party Transactions:
One of the previous owners and its wholly owned subsidiary have provided
various professional services to the Property. A summary of costs and fees
incurred and expensed for the year ended December 31, 1997 follows:
<TABLE>
<CAPTION>
<S> <C>
Payroll and related benefits $1,604
Management fees 698
Leasing commissions 131
Professional services 31
</TABLE>
F-36
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
On April 6, 1998, The Rouse Company and Westfield America, Inc. entered into an
agreement to purchase a portfolio of interests in retail centers from TrizecHahn
Centers, Inc. Under terms of the agreement, as amended, and subject to certain
terms and conditions, The Rouse Company has agreed to purchase interests in
seven retail centers for approximately $1.1 billion.
On October 9, 1998, the Company filed a Current Report on Form 8-K/A that
included financial statements of real estate operations acquired specified by
Rule 3-14 of Regulation S-X ("Rule 3-14") for Park Meadows Mall and Valley Fair
and related pro forma financial information required pursuant to Article 11 of
Regulation S-X. This Current Report on Form 8-K/A dated November 16, 1998,
includes the previously filed financial statements of Park Meadows Mall and
Valley Fair specified by Rule 3-14 and the financial statements of acquired real
estate operations specified by Rule 3-14 for Fashion Place, The Fashion Show,
Westdale Mall and Towson Town Center.
Fashion Place is a regional shopping center in Salt Lake City, Utah. The center
was constructed in 1972 and was substantially renovated in 1988. The Company is
currently analyzing a new expansion/renovation opportunity for the center. The
center contains approximately 382,000 square feet of leasable mall space and
three department stores (Dillard's, Nordstrom and Sears) totaling 566,000 square
feet of space. The center is leased primarily to high profile, national
retailers, produces sales of approximately $360 per square foot and is 96%
occupied. The Fashion Show is a regional shopping center on the "Strip" in Las
Vegas, Nevada. The center was constructed in 1981, was substantially renovated
in 1995 and is in excellent condition. It contains approximately 308,000 square
feet of leasable mall space and five department stores (Dillard's, Macy's,
Neiman-Marcus, Robinson's-May and Saks Fifth Avenue) totaling 532,000 square
feet. The center is leased primarily to high profile, national retailers,
produces sales of approximately $500 per square foot and is 100% occupied.
Towson Town Center is a regional shopping center in Towson, Maryland, just north
of Baltimore. The center was initially constructed in 1959, was substantially
renovated in 1992 and is in excellent condition. It contains approximately
536,000 square feet of leasable mall space and two department stores (Hecht's
and Nordstrom) totaling 419,000 square feet of space. The center is leased
primarily to high profile, national retailers, produces sales of approximately
$374 per square foot and is 91% occupied. Substantially all of the tenant
leases in each of the properties provide for the recovery of operating expenses
and for contingent rentals based on tenant sales levels in addition to minimum
rentals. Most of the leases also provide for increases in minimum rentals over
their terms. Fashion Place, The Fashion Show and Towson Town are among the
dominant centers in their respective markets. The Company intends to operate
them so as to maintain their competitive positions and, after reasonable
inquiry, is not aware of any material factors that would cause the reported
information not to be necessarily indicative of future operating results of the
properties.
F-37
<PAGE>
In connection with the purchase transactions, the Company decided to hold for
sale its ownership interest in H-N-W Associates, a limited partnership (HNW) and
its interest in Valley Fair. HNW owns a 35.3% interest in Westdale Associates,
a general partnership that owns assets known as Westdale Mall. The Company
believes it has the ability to sell its ownership interests within twelve
months. Accordingly, the Company will exclude from its consolidated statement
of operations any profit or loss resulting from the operation or sale of its
ownership interests in these properties. Any profit or loss from operations or
gain or loss on the ultimate dispositions will be treated as adjustments to the
purchase price allocation.
The remaining retail center acquisition is expected to close in the fourth
quarter of 1998.
The following unaudited pro forma condensed consolidated financial statements
are based upon the consolidated financial statements of The Rouse Company and
the statements of revenues and certain expenses of Park Meadows Mall, Fashion
Place, The Fashion Show and Towson Town Center adjusted to give effect to the
purchase of such properties. The pro forma condensed consolidated statements of
operations do not include any revenues, operating and interest expenses or
depreciation and amortization relating to Valley Fair and Westdale Mall due to
the Company's decision to sell its interests in these properties. The pro forma
condensed consolidated balance sheet and statements of operations are provided
to illustrate the effects of the acquisitions on The Rouse Company and have been
prepared using the purchase method of accounting and, accordingly, the cost to
purchase the interests in the properties is allocated among the assets acquired
and liabilities assumed according to their respective fair values. These
statements reflect how the balance sheet of The Rouse Company might have
appeared at June 30, 1998, if the acquisitions had been consummated at that
date, and how the statements of operations of The Rouse Company for the year
ended December 31, 1997, and the six months ended June 30, 1998, might have
appeared if the acquisitions had been consummated at the beginning of the
respective periods. These unaudited pro forma condensed consolidated financial
statements are not necessarily indicative of the results of operations or
financial position of The Rouse Company that would have occurred had the
acquisitions occurred at the beginning of the periods presented or on the date
indicated, nor are they necessarily indicative of the future results of
operations or financial position of The Rouse Company.
These unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements of The
Rouse Company and the audited statements of revenues and certain
expenses specified by Rule 3-14 included elsewhere in this report. The
unaudited pro forma adjustments are based upon certain assumptions included in
the notes to the unaudited pro forma condensed consolidated financial
statements.
F-38
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
The Rouse
The Rouse Company and
Company and Allocated Pro Forma Subsidiaries
Subsidiaries Purchase Adjustments (Pro Forma
ASSETS (Historical) Price (Note 1) (Note 2) Combined)
------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Property
Operating properties, net........................ $2,740,081 $ 720,419 $ - $3,460,500
Properties in development........................ 170,696 - - 170,696
Properties held for sale......................... 1,000 146,991 - 147,991
---------- ---------- ----------- ----------
Total property............................... 2,911,777 867,410 - 3,779,187
Investments in and advances to
unconsolidated real estate ventures............... 286,431 13,664 - 300,095
Prepaid expenses, receivables under
finance leases and other assets................... 225,797 6,656 - 232,453
Accounts and notes receivable...................... 95,920 711 - 96,631
Investments in marketable securities............... 3,866 - - 3,866
Cash and cash equivalents.......................... 39,647 (471,674) 435,155 3,128
---------- ---------- ----------- ----------
Total........................................ $3,563,438 $ 416,767 $435,155 $4,415,360
========== ========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt............................................... $2,545,102 $ 415,121 $431,987 $3,392,210
Obligations under capital leases................... 54,866 - - 54,866
Accounts payable, accrued expenses
and other liabilities............................. 322,295 1,646 3,168 327,109
Company-obligated mandatorily redeemable
preferred securities of a trust holding
solely Parent Company subordinated
debt securities................................... 137,500 - - 137,500
Shareholders' equity............................... 503,675 - - 503,675
---------- ---------- ----------- ----------
Total........................................ $3,563,438 $ 416,767 $435,155 $4,415,360
========== ========== =========== ==========
</TABLE>
F-39
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
First Closing
----------------------------------------------------- The Rouse Company
The Rouse and Subsidiaries
Company and Park Pro Forma (Pro Forma Combined as
Subsidiaries Meadows Adjustments reported in Form 8-K/A
(Historical) Mall Valley Fair (Note 3) filed October 9, 1998)
------------- ------------- --------------- --------------------- -----------------------
<S> <C> <C> <C> <C> <C>
Revenues........................ $ 930,094 $ 31,322 $ 25,057 $ (2,355) (b) $ 959,061
(12,529) (h)
Operating expenses, exclusive (12,528) (a)
of provision for bad debts,
depreciation and amortization.. 532,240 9,690 5,910 (2,955) (a) 542,890
(2,955) (h)
960 (c)
Interest expense................ 207,490 1,731 - 14,613 (d) 225,445
9,057 (e)
2,564 (f)
(10,010) (h)
Provision for bad debts......... 5,766 - - - 5,766
Depreciation and amortization... 86,009 - - 4,460 (g) 90,469
Equity in earnings of
unconsolidated real estate
ventures....................... - - - - -
Gain (loss) on dispositions of
assets and other provisions,
net............................ (24,763) - - - (24,763)
---------- ------------- --------------- ---------- ----------
Earnings from continuing
operations before income
taxes.......................... 73,826 19,901 19,147 (43,146) 69,728
Income taxes.................... (116,066) - - - (116,066)
---------- ------------- --------------- ---------- ----------
Earnings from continuing
operations..................... $ 189,892 $ 19,901 $ 19,147 $ (43,146) $ 185,794
========== ============= =============== ========== ==========
Earnings from continuing
operations per share of
common stock after
provision for dividends on
Preferred stock :
Basic......................... $ 2.70 $ 2.64
========== ==========
Diluted....................... $ 2.59 $ 2.54
========== ==========
Weighted average number of
common shares outstanding:
Basic......................... 66,201 66,201
========== ==========
Diluted....................... 76,005 76,005
========== ==========
<CAPTION>
Second and Third Closings
-------------------------------------------------------- The Rouse
Company and
The Towson Pro Forma Subsidiaries
Fashion Fashion Westdale Town Adjustments (Pro Forma
Place Show Mall Center (Note 3) Combined)
-------- -------- -------- -------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................ $11,587 $20,612 $8,422 $24,393 $ (8,422) (a) $ 995,041
(20,612) (b)
Operating expenses, exclusive
of provision for bad debts,
depreciation and amortization.. 3,478 5,524 4,416 7,842 (4,416) (a) 552,224
(5,524) (b)
(2,368) (b)
382 (c)
Interest expense................ - 6,230 2,231 - (2,231) (a) 254,461
(6,230) (b)
15,170 (d)
5,264 (e)
9,450 (f)
(868) (h)
Provision for bad debts......... - - - - - 5,766
Depreciation and amortization... 6,722 (g) 97,191
Equity in earnings of
unconsolidated real estate
ventures....................... - - - - 686 (a) -
(686) (h)
Gain (loss) on dispositions of
assets and other provisions,
net............................ - - - - - (24,763)
-------- -------- -------- -------- --------- ----------
Earnings from continuing
operations before income
taxes.......................... 8,109 8,858 1,775 16,551 (44,385) 60,636
Income taxes.................... - - - - - (116,066)
-------- -------- -------- -------- --------- ----------
Earnings from continuing
operations..................... $ 8,109 $ 8,858 $1,775 $16,551 $ (44,385) $ 176,702
======== ======== ======== ======== ========= ==========
Earnings from continuing
operations per share of
common stock after
provision for dividends on
Preferred stock :
Basic......................... $ 2.50
==========
Diluted....................... $ 2.42
==========
Weighted average number of
common shares outstanding:
Basic......................... 66,201
==========
Diluted....................... 76,005
==========
</TABLE>
F-40
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
First Closing
----------------------------------------------------- The Rouse Company
The Rouse and Subsidiaries
Company and Park Pro Forma (Pro Forma Combined as
Subsidiaries Meadows Adjustments reported in Form 8-K/A
(Historical) Mall Valley Fair (Note 3) filed October 9, 1998
------------- ------------- -------------- ------------------ ----------------------
<S> <C> <C> <C> <C> <C>
Revenues........................ $335,243 $ 14,970 $ 13,164 $ (1,177) (b) $349,036
(6,582) (h)
Operating expenses, exclusive (6,582) (a)
of provision for bad debts,
depreciation and amortization.. 181,429 4,207 3,650 (1,825) (a) 186,042
406 (c)
(1,825) (h)
Interest expense................ 90,659 845 - 7,306 (d) 99,588
4,501 (e)
1,282 (f)
(5,005) (h)
Provision for bad debts......... 1,790 - - - 1,790
Depreciation and amortization... 36,199 - - 2,230 (g) 38,429
Equity in earnings of
unconsolidated real estate
ventures....................... 36,660 - - - 36,660
Gain (loss) on dispositions of
assets and other provisions,
net............................ 2,169 - - - 2,169
-------- ------------- -------------- ----------------- --------
Earnings from continuing
operations before income
taxes.......................... 63,995 9,918 9,514 (21,411) 62,016
Income taxes.................... 199 - - - 199
-------- ------------- -------------- ------------------- --------
Earnings from continuing
operations..................... $ 63,796 $ 9,918 $ 9,514 $ (21,411) $ 61,817
======== ============= ============== =================== ========
Earnings from continuing
operations per share of
common stock after
provision for dividends on
Preferred stock :
Basic......................... $ .86 $ .83
======== ========
Diluted....................... $ .84 $ .81
======== ========
Weighted average number of
common shares outstanding:
Basic......................... 66,978 66,978
======== ========
Diluted....................... 72,720 72,720
======== ========
<CAPTION>
Second and Third Closings
----------------------------------------------- The Rouse
Company and
The Towson Pro Forma Subsidiaries
Fashion Fashion Westdale Town Adjustments (Pro Forma
Place Show Mall Center (Note 3) Combined)
------- ------- -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................ $ 5,737 $ 9,522 $ 3,773 $ 11,908 $ (3,773) (a) $366,681
(9,522) (b)
Operating expenses, exclusive
of provision for bad debts,
depreciation and amortization.. 1,796 2,516 1,882 3,653 (1,882) (a) 190,583
(1,097) (b)
(2,516) (b)
189 (c)
Interest expense................ - 3,087 1,086 - (1,086) (a) 114,096
(3,087) (b)
7,585 (d)
2,632 (e)
4,725 (f)
(434) (h)
Provision for bad debts......... - - - - - 1,790
Depreciation and amortization... - - - - 3,361 (g) 41,790
Equity in earnings of
unconsolidated real estate
ventures....................... - - - - 298 (a) 36,660
(298) (h)
Gain (loss) on dispositions of
assets and other provisions,
net............................ - - - - - 2,169
------- ------- -------- -------- --------- --------
Earnings from continuing
operations before income
taxes.......................... 3,941 3,919 805 8,255 (21,496) 57,251
Income taxes.................... - - - - - 199
------- ------- -------- -------- --------- --------
Earnings from continuing
operations..................... $ 3,941 $ 3,919 $ 805 $ 8,255 $ (16,772) $ 57,052
======= ======= ======== ======== ========= ========
Earnings from continuing
operations per share of
common stock after
provision for dividends on
Preferred stock :
Basic......................... $.76
========
Diluted....................... $.75
========
Weighted average number of
common shares outstanding:
Basic......................... 66,978
========
Diluted....................... 72,720
========
</TABLE>
F-41
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
1. Allocated Purchase Price
------------------------
The acquisition will be accounted for by the purchase method of accounting.
Accordingly, the Company's cost to acquire 100% ownership of Park Meadows
Mall, Towson Town Center and Fashion Place, a 50% ownership interest in
Valley Fair, a 25% interest in The Fashion Show and a 58.1% interest in H-
N-W Associates (HNW) (which owns a 35.3% interest in Westdale Mall) will be
allocated to the assets acquired and liabilities assumed according to their
respective fair values. In connection with the acquisitions, the Company
decided to sell the Company's ownership interests in Valley Fair and HNW.
The cost allocated to its interest in Valley Fair is classified as property
held for sale in the accompanying pro forma balance sheet.
The unaudited pro forma condensed consolidated financial statements
indicate that the aggregate fair value of the assets acquired and
liabilities assumed in the purchase are $891,569,000 and $416,767,000,
respectively. The purchase allocation adjustments made in connection with
the development of the unaudited pro forma condensed combined financial
statements are based on the information available at this time. Subsequent
adjustments and refinements to the allocation may be made based on
additional information.
2. Balance Sheet Pro Forma Adjustments
-----------------------------------
The accompanying unaudited pro forma condensed consolidated balance sheet
reflects the following adjustment to give effect to the acquisition of the
ownership interests in the retail properties. The Company used available
cash to pay approximately $42,817,000 and proceeds from additional mortgage
debt secured by one of the properties to pay approximately $21,000,000 of
the purchase price. The balance of the net purchase price of
$410,987,000 was provided by borrowings under the Company's unsecured
revolving credit and bridge loan facilities. The accompanying unaudited pro
forma condensed consolidated balance sheet as of June 30, 1998 reflects an
adjustment of $3,168,000 to reclassify the bank overdraft attributable to
the payment of cash at acquisition to other liabilities.
F-42
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
3. Statements of Operations Pro Forma Adjustments
----------------------------------------------
The accompanying unaudited pro forma condensed consolidated statements of
operations reflect certain adjustments which are explained below to give
effect to the acquisition of the interests in retail properties and to
include results of operations for the indicated periods of the acquired
properties based on accounting policies of the Company where such policies
differ from those which were applied in preparing the historical financial
statements of the acquired properties included elsewhere herein.
FIRST CLOSING
-------------
(a) Adjust revenues and certain operating expenses to reflect the Company's
50% ownership interest in Valley Fair.
(b) Eliminate income earned on available cash of $42,817,000 paid at
closing. The pro forma reduction of interest revenue was calculated
using an average interest rate of 5.5%.
(c) Adjust operating expenses for Park Meadows Mall to reflect management
and leasing costs consistent with costs incurred by the Company at
similar retail properties.
(d) Record interest expense incurred on borrowings of $210 million under a
line of credit facility used to fund a portion of the net purchase
price. The pro forma interest expense on these borrowings was
calculated using an effective interest rate of 6.96%.
(e) Record interest expense at an effective rate of 6.66% for mortgage note
secured by Park Meadows Mall assumed by a subsidiary of the Company in
connection with the acquisition.
(f) Record interest expense at an effective rate of 6.41% for mortgage note
secured by Valley Fair assumed by a subsidiary of the Company in
connection with the acquisition.
(g) Record depreciation and amortization expense for Park Meadows Mall in
accordance with the established accounting policies of the Company.
F-43
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
3. Statements of Operations Pro Forma Adjustments, Continued
---------------------------------------------------------
FIRST CLOSING, CONTINUED
------------------------
(h) In connection with the purchase of its 50% ownership interest in Valley
Fair the Company made a decision to market its ownership interest for
sale. Accordingly, pro forma adjustments are to eliminate the
Company's share of operations of Valley Fair from the pro forma
condensed consolidated statements of operations.
SECOND AND THIRD CLOSINGS
-------------------------
(a) Eliminate revenues and certain operating expenses and record equity in
earnings of unconsolidated real estate ventures related to the
Company's 58.1% partnership interest in HNW. HNW owns a 35.3%
interest in Westdale Associates, a general partnership that owns assets
known as Westdale Mall.
(b) Eliminate revenues, certain operating expenses, interest expense and
minority interest participation to reflect the Company's acquisition of
the remaining 25% interest in The Fashion Show. The historical
consolidated financial statements of The Rouse Company for the year
ended December 31, 1997 and the six months ended June 30, 1998 include
100% of the revenues and certain operating expenses and minority
interest participation expense of $2,368,000 and $1,097,000
respectively, representing TrizecHahn's 25% interest.
(c) Adjust operating expenses for Fashion Place to include management and
leasing costs consistent with costs incurred by the Company at similar
operating properties.
(d) Record interest expense incurred on borrowings of $225,863,000 under
the bridge loan and unsecured revolving credit facilities used to fund
a portion of the net purchase price and to repay a portion of assumed
mortgage debt. The pro forma interest expense on these borrowings was
calculated using an effective interest rate of 6.72%.
(e) Record interest expense at an effective rate of 6.74% for mortgage note
(including additional borrowings at closing of the purchase of
$21,000,000) secured by Fashion Place assumed by subsidiaries of the
Company in connection with the acquisition.
F-44
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
3. Statement of Operations Pro Forma Adjustments, Continued
--------------------------------------------------------
SECOND AND THIRD CLOSINGS, CONTINUED
------------------------------------
(f) Record interest expense at an effective rate of 6.75% for a new
mortgage note secured by Towson Town Center, the proceeds of which were
used to repay a portion of a mortgage note assumed by a subsidiary of
the Company in connection with the acquisition.
(g) Record or adjust depreciation and amortization expense for Fashion
Place, The Fashion Show and Towson Town Center in accordance with the
established accounting policies of the Company.
(h) In connection with the purchase of its ownership interest in HNW the
Company made a decision to market its ownership interest for sale.
Accordingly, pro forma adjustments are to eliminate the Company's
equity in earnings of Westdale Mall and allocated interest from the
pro forma condensed consolidated statements of operations.
F-45
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
The Rouse Company on Form S-3 (File Nos. 2-78898, 2-95596, 33-52458, 33-57347,
33-57707 and 333-20781), Form S-8 (File Nos. 2-83612, 33-56231, 33-56233,
33-56235 and 333-32277) and Form S-4 (File No. 333-1693) of our report dated
June 19, 1998, on our audit of the statement of revenues and certain expenses of
the Fashion Place Property for the year ended December 31, 1997, our report
dated June 15, 1998, on our audit of statement of revenues and certain expenses
of the Valley Fair Property for the year ended December 31, 1997 and of our
report dated June 15, 1998, on our audit of the statement of revenues and
certain expenses of the Park Meadows Mall Property for the year ended December
31, 1997, which reports are included in this filing on Form 8-K/A.
PRICEWATERHOUSECOOPERS LLP
Newport Beach, California
November 13, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
The Rouse Company on Form S-3 (File Nos. 2-78898, 2-95596, 33-52458, 33-57347,
33-57707 and 333-20781), Form S-8 (File Nos. 2-83612, 33-56231, 33-56233,
33-56235 and 333-32277) and Form S-4 (File No. 333-1693) of our report dated
September 15, 1998, on our audit of the statement of revenues and certain
expenses of The Fashion Show for the year ended December 31, 1997, which report
is included in this filing on Form 8-K/A. Our report contains a paragraph that
states that the statement of revenues and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission as described in note 2 and is not intended to be a complete
presentation of The Fashion Show's revenues and expenses.
KPMG Peat Marwick LLP
Baltimore, Maryland
November 13, 1998
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors of The Rouse Company:
We consent to the incorporation by reference in the registration statements on
Form S-3 (File Nos. 2-78898, 2-95596, 33-52458, 33-57347, 33-57707 and 333-
20781), Form S-8 (File Nos. 2-83612, 33-56231, 33-56233, 33-56235 and 333-32277)
and Form S-4 (File No. 333-1693) of The Rouse Company of our report dated
June 8, 1998, with respect to the statement of revenue and certain expenses of
Westdale Mall for the year ended December 31, 1997, which report appears in the
Form 8-K/A of The Rouse Company, dated November 16, 1998 (date of earliest event
reported October 7, 1998). Such report contains a paragraph that states that the
statement of revenue and certain expenses was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission as described in Note 1. It is not intended to be a complete
presentation of Westdale Mall's revenue and expenses.
KPMG Peat Marwick LLP
San Diego, California
November 16, 1998
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors of The Rouse Company:
We consent to the incorporation by reference in the registration statements on
Form S-3 (File Nos. 2-78898, 2-95596, 33-52458, 33-57347, 33-57707 and 333-
20781), Form S-8 (File Nos. 2-83612, 33-56231, 33-56233, 33-56235 and 333-32277)
and Form S-4 (File No. 333-1693) of The Rouse Company of our report dated
June 8, 1998, with respect to the statement of revenue and certain expenses of
Towson Town Center for the year ended December 31, 1997, which report appears in
the Form 8-K/A of The Rouse Company, dated November 16, 1998 (date of earliest
event reported October 7, 1998). Such report contains a paragraph that states
that the statement of revenue and certain expenses was prepared for the purpose
of complying with the rules and regulations of the Securities and Exchange
Commission as described in Note 1. It is not intended to be a complete
presentation of Towson Town Center's revenue and expenses.
KPMG Peat Marwick LLP
San Diego, California
November 16, 1998
