<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) December 3, 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 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.
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 acquired 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 funded 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. These transactions resulted
in Company subsidiaries owning 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 these
transactions in its Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 21, 1998.
<PAGE>
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, a
Company subsidiary acquired a 100% ownership 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. 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 related to the Second and Third
Closings were previously reported in the Company's Current Report on Form 8-K/A
filed on November 16, 1998.
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.
On December 3, 1998, a wholly owned subsidiary of the Company purchased from
TrizecHahn assets known as Bridgewater Commons. As a result, the Company
acquired a 100% ownership interest in Bridgewater Commons. This transaction is
referred to as the Fourth Closing. The Company reported this transaction in its
Current Report on Form 8-K filed with the Securities and Exchange Commission on
December 18, 1998.
Bridgewater Commons is a regional shopping center in Bridgewater, New Jersey and
contains approximately 381,000 square feet of leasable mall space and three
department stores encompassing 503,000 square feet of space. Bridgewater
Commons will continue to operate as a regional shopping center.
The aggregate purchase price for the property, negotiated between the Company
and TrizecHahn, was approximately $264,596,000, including approximately
$162,209,000 paid at closing and approximately $102,387,000 of mortgage debt
secured by the property which was assumed by a subsidiary of the Company. The
Company used $91,100,000 of proceeds from a sale to TrizecHahn of three office
buildings purchased by the Company in November 1998, $150,000,000 of proceeds
from new mortgage
<PAGE>
debt secured by the property and $23,496,000 of borrowings under the
aforementioned credit facilities to repay the assumed mortgage debt and fund the
purchase price.
The Company previously reported in its Current Report on Form 8-K filed with the
Securities and Exchange Commission February 12, 1999, that on February 1, 1999,
a subsidiary of the Company completed the establishment of a joint venture (the
"Four State Venture") with a joint venture (the "Morgan/NYSTRS Venture")
consisting of J.P. Morgan Strategic Property Fund ("Morgan") and the New York
State Teachers' Retirement System ("NYSTRS"). The Company subsidiary
contributed to the Four State Venture its ownership interests in four of the
retail centers (Bridgewater Commons, Park Meadows Mall, Fashion Place and Towson
Town Center) acquired from TrizecHahn. The Morgan/NYSTRS Venture contributed a
total of approximately $271 million in cash to the Four State Venture and
received a 65% ownership interest in the Four State Venture. The Company
retained a 35% interest in the Four State Venture and Four State Venture repaid
approximately $271 million of the Company's credit facility borrowings.
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, Towson Town Center and
Bridgewater Commons and related pro forma financial information of the Company
for the effects of the property interest acquisitions and the effects of the
contribution of certain of the property interests to Four State Venture.
<PAGE>
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 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: February 16, 1999 By /s/ Jeffrey H. Donahue
------------------- -----------------------
Jeffrey H. Donahue
Executive Vice-President and
Chief Financial Officer
Date: February 16, 1999 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), Towson Town Center (as described in the Company's Current
Report on Form 8-K dated October 21, 1998) and Bridgewater Commons (as described
in the Company's Current Report on Form 8-K dated December 18, 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 of the properties 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-48. 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.
PAGE
----
PARK MEADOWS MALL PROPERTY
- --------------------------
Report of Independent Accountants......................................... F-5
Statement of Revenues and Certain Expenses
for the Year Ended December 31, 1997................................... F-6
Notes to Statement of Revenues and Certain Expenses....................... F-7
VALLEY FAIR PROPERTY
- --------------------
Report of Independent Accountants......................................... F-11
Statement of Revenues and Certain Expenses
for the Year Ended December 31, 1997................................... F-12
Notes to Statement of Revenues and Certain Expenses....................... F-13
<PAGE>
PAGE
----
FASHION PLACE PROPERTY
- ----------------------
Report of Independent Accountants......................................... F-17
Statement of Revenues and Certain Expenses
for the Year Ended December 31, 1997................................... F-18
Notes to Statement of Revenues and Certain Expenses....................... F-19
THE FASHION SHOW
- ----------------
Independent Auditors' Report.............................................. F-23
Statement of Revenues and Certain Expenses
for the Year Ended December 31, 1997................................... F-24
Notes to Statement of Revenues and Certain Expenses....................... F-25
WESTDALE MALL
- -------------
Independent Auditors' Report.............................................. F-28
Statement of Revenue and Certain Expenses
for the Year Ended December 31, 1997................................... F-29
Notes to Statement of Revenue and Certain Expenses........................ F-30
TOWSON TOWN CENTER
- ------------------
Independent Auditors' Report.............................................. F-34
Statement of Revenue and Certain Expenses
for the Year Ended December 31, 1997................................... F-35
Notes to Statement of Revenue and Certain Expenses........................ F-36
BRIDGEWATER COMMONS PROPERTY
- ----------------------------
Report of Independent Accountants......................................... F-39
Statement of Revenue and Certain Expenses
for the Year Ended December 31, 1997................................... F-40
Notes to Statement of Revenue and Certain Expenses........................ F-41
PROPERTY INTERESTS ACQUIRED BY THE ROUSE COMPANY
FROM TRIZECHAHN CENTERS, INC
- ----------------------------
Statements of Revenues and Certain Expenses for the
Nine Months Ended September 30, 1998 (Unaudited)........................ F-45
Notes to Statements of Revenues and Certain Expenses (Unaudited).......... F-46
<PAGE>
PAGE
----
THE ROUSE COMPANY AND SUBSIDIARIES
- ----------------------------------
Introductory language regarding Unaudited Pro Forma
Condensed Consolidated Financial Statements............................. F-48
Pro Forma Condensed Consolidated Balance
Sheet as of September 30, 1998 (unaudited).............................. F-51
Pro Forma Condensed Consolidated Statement
of Operations for the Year Ended December 31, 1997 (unaudited).......... F-52
Pro Forma Condensed Consolidated Statement
of Operations for the Nine Months Ended September 30, 1998 (unaudited).. F-54
Notes to Pro Forma Condensed Consolidated Financial
Statements (unaudited).................................................. F-56
<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-5
<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>
Revenues:
<S> <C>
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-6
<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-7
<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-8
<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-9
<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-10
<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-11
<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>
Revenues:
<S> <C>
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-12
<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-13
<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-14
<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-15
<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-16
<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-17
<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>
Revenues:
<S> <C>
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-18
<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-19
<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-20
<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-21
<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-22
<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-23
<PAGE>
THE FASHION SHOW
Statement of Revenues and Certain Expenses
Year ended December 31, 1997
<TABLE>
<CAPTION>
Revenues:
<S> <C>
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-24
<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-25
<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-26
<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-27
<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-28
<PAGE>
WESTDALE MALL
Statement of Revenue and Certain Expenses
Year ended December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Revenue:
<S> <C>
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-29
<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-30
<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-31
<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-32
<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-33
<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-34
<PAGE>
TOWSON TOWN CENTER
Statement of Revenue and Certain Expenses
Year ended December 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Revenue:
<S> <C>
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-35
<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 on 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-36
<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-37
<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-38
<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 Bridgewater Commons Property, as defined in
Note 1, which is intended to be acquired by The Rouse Company. This statement
is the responsibility of 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 Bridgewater
Commons 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 Bridgewater Commons
Property's revenues and expenses.
In our opinion, the statement referred to above presents fairly, in all material
respects, the revenues and certain expenses as described in Note 2, of the
Bridgewater Commons Property for the year ended December 31, 1997, in conformity
with generally accepted accounting principles.
PricewaterhouseCoopers LLP
Newport Beach, California
June 15, 1998
F-39
<PAGE>
BRIDGEWATER COMMONS PROPERTY
Statement of Revenues and Certain Expenses
of the Bridgewater Commons Property
to be Acquired by The Rouse Company
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Revenues:
<S> <C>
Minimum rent $15,172,678
Overage rent 1,363,102
Cart and temporary tenant rents 1,242,590
Recoveries from tenants 8,098.617
Other income 445,030
-----------
26,322,017
-----------
Certain expenses:
Operating expenses 5,302,857
Promotion 31,144
Professional services 80,631
Participation rent expense 636,961
Other expenses 134,190
Property taxes 2,621,794
-----------
8,807,577
-----------
Revenue in excess of certain expenses $17,514,440
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-40
<PAGE>
BRIDGEWATER COMMONS PROPERTY
Notes to Statement of Revenues and Certain Expenses
1. Organization:
The accompanying statement of revenues and certain expenses (the "Statement")
of the Bridgewater Commons Property, as defined herein, relates to the
operations of a regional shopping center, Bridgewater Commons, located in
Bridgewater, New Jersey (the "Bridgewater Commons Property" or "Property")
which is owned by Bridgewater Commons Associates, a partnership (the
"Partnership"), and is managed by TrizecHahn Centers Management Inc.
("THCMI"), a wholly owned subsidiary of TrizecHahn Centers Inc. ("THCI").
The ownership interest of THCI in the Partnership 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 Statement includes the Partnership and its wholly owned subsidiary, Hahn
Issuing Corporation II (the "Subsidiary") which is a California corporation
formed in 1987 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 was formed on October 17, 1986. The Partnership plans to
develop a real estate project in three phases. The Partnership agreement
provides that the Partnership shall continue for a period of 99 years,
provided there are no dissolutions due to sales or acquisitions. The
partners and their respective interests in the profits and losses and
distributions of the Partnership as of December 31, 1997 are as follows:
The Prudential Insurance Company of America ("Prudential") 50%
Midway Associates ("Midway") 49%
EWH 1979 Development Company, L.P. ("EWH") 1%
A related party, THCI owns approximately 66% of EWH and 99% of Midway as of
December 31, 1997.
F-41
<PAGE>
BRIDGEWATER COMMONS PROPERTY
Notes to Statement of Revenues and Certain Expenses, Continued
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.
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 certain expenses during the reporting
period to prepare this Statement in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
F-42
<PAGE>
BRIDGEWATER COMMONS PROPERTY
Notes to Statement of Revenues and Certain Expenses, Continued
3. Commitments and Contingencies:
Redevelopment Agency Agreement:
------------------------------
Pursuant to the Bridgewater Redevelopment Agency Agreement ("Agency
Agreement") between the Partnership and the Township of Bridgewater
("Agency"), the property was to be developed in three phases. Phase I,
consisting of a regional shopping center, was completed on February 24, 1988.
Under the original plan, Phase II and Phase III were to be developed as an
office complex and a hotel, respectively. However, in June 1997, the Agency
Agreement was amended to provide for additional retail development, including
the option to expand the mall and to allow for development of full-service
and/or suites hotel properties.
Pursuant to the Agency Agreement, the Agency is entitled to receive from the
Partnership participation rental equal to 15% of minimum rent and percentage
rent collected in excess of annual minimum stabilized rents of the Phase I
shopping center as defined. Participation rent expense totaled $636,961 for
the year ended December 31, 1997.
In addition, the amended Agreement provides for participation rental equal to
10% of minimum rent and percentage rent collected in excess of annual minimum
stabilized rents from the Phase I expansion. The amended Agreement
eliminates the Agency's right to receive participation from rent collected
from the Phase II improvements. As the Phase I expansion is still under
development, no participation rent was paid on this Phase during 1997.
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 the tenant's gross
sales exceed a stated amount.
F-43
<PAGE>
BRIDGEWATER COMMONS PROPERTY
Notes to Statement of Revenues and Certain Expenses, Continued
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 $12,957,942
1999 11,524,982
2000 10,473,098
2001 10,166,051
2002 9,869,553
thereafter 43,684,104
-----------
$98,675,730
===========
</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.
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 $1,385,074
Development fees 115,083
Professional services 15,245
Legal fees 56,385
----------
$1,571,787
==========
</TABLE>
F-44
<PAGE>
SPECIFIED PROPERTY INTERESTS ACQUIRED BY THE ROUSE COMPANY
FROM TRIZECHAHN CENTERS, INC.
Combined Statements of Revenues and Certain Expenses (Unaudited)
Nine Months Ended September 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Towson Town Bridgewater
Park Meadows Valley Fair Fashion Place The Fashion Westdale Center Commons
Mall Property Property Property Show Mall Property Property Total
------------- ----------- ------------- ----------- -------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Minimum Rent $11,887 $12,163 $5,591 $9,816 $3,711 $12,401 $12,178 $ 67,747
Overage Rent 99 740 107 827 244 100 259 2,376
Carts and temporary
tenants 731 - 303 508 - 580 618 2,740
Recoveries from tenants 5,968 5,577 2,336 3,923 1,362 5,067 5,630 29,863
Other income 3,868 1,266 193 236 343 450 174 6,530
------------- ----------- ------------- ----------- -------- --------- ----------- ---------
22,553 19,746 8,530 15,310 5,660 18,598 18,859 109,256
------------- ----------- ------------- ----------- -------- --------- ----------- ---------
Certain expenses:
Operating expenses 5,128 4,550 1,989 3,661 2,122 4,595 4,261 26,306
Property taxes 1,672 825 598 523 661 1,041 2,010 7,330
Promotion 27 20 32 17 19 26 26 167
Professional services 82 81 82 28 21 72 79 445
Interest expense 1,240 - - 4,576 1,629 - - 7,445
------------- ----------- ------------- ----------- -------- --------- ----------- ---------
8,149 5,476 2,701 8,805 4,452 5,734 6,376 41,693
------------- ----------- ------------- ----------- -------- --------- ----------- ---------
Revenues in excess
of certain expenses $14,404 $14,270 $5,829 $6,505 $1,208 $12,864 $12,483 $67,563
============= =========== ============= =========== ======== ========= =========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-45
<PAGE>
SPECIFIED PROPERTY INTERESTS ACQUIRED BY THE ROUSE COMPANY FROM
TRIZECHAHN CENTERS, INC
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
(UNAUDITED)
Nine Months Ended September 30, 1998
1. Organization
The ownership structures of the properties prior to the acquisitions by The
Rouse Company (the "Company") from TrizecHahn Centers, Inc. are set forth in
the applicable notes to the statements of revenues and certain expenses for
the year ended December 31, 1997, included elsewhere herein. As a result of
the acquisition transactions, subsidiaries of The Rouse Company owned 100%
interests in Park Meadows Mall, Fashion Place, The Fashion Show, Towson Town
Center and Bridgewater Commons, a 50% interest in Valley Fair and a 20.5%
interest in Westdale Mall. On February 1, 1999, a subsidiary of the Company
contributed to a joint venture its ownership interests in Park Meadows Mall,
Fashion Place, Towson Town Center and Bridgewater Commons and retained a 35%
interest in the joint venture.
2. Basis of Presentation
The accompanying statements are presented on the accrual basis of accounting
in conformity with Rule 3-14 of the Regulation S-X of the Securities and
Exchange Commission. Accordingly, the statements are not representative of
the actual operations for the periods presented because certain expenses
which may not be comparable to those expected to be incurred by the Company
in its operations of the properties have been excluded. Expenses excluded
consist of depreciation and amortization, certain management and leasing
fees, certain mortgage interest expense and other items not directly related
to the proposed future operations of the properties.
Descriptions of other significant accounting policies used in the
preparation of the accompanying statements and various other disclosure
matters are set forth in the applicable notes to the statements of revenues
and certain expenses for the applicable properties for the year ended
December 31, 1997, included elsewhere herein.
3. Public Improvement Fee Revenue
Public Improvement Fees ("PIF") are assessed on the retail sales of each
tenant of Park Meadows Mall in order to fund the repayment of bonds issued
for the purpose of financing public infrastructure improvements. The
accompanying statement for Park Meadows Mall includes PIF revenue of
$3,589,000, interest earned on undisbursed bond proceeds of $117,000 and
interest expense of $1,240,000 for the nine months ended September 30, 1998.
F-46
<PAGE>
SPECIFIED PROPERTY INTERESTS ACQUIRED BY THE ROUSE COMPANY FROM
TRIZECHAHN CENTERS, INC
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
(UNAUDITED)
Nine Months Ended September 30, 1998
4. Related Party Transactions
Affiliates of TrizecHahn Centers, Inc. and The Rouse Company provided
various services to the properties for the nine months ended September 30,
1998, including management and other professional services. Related party
costs included in operating expenses and professional services for the nine
months ended September 30, 1998, aggregated approximately $7,812,000 and
$209,000, respectively.
F-47
<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, The Rouse Company
purchased 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. On November 16, 1998, the Company filed a Current Report on
Form 8-K/A that included 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 and related pro forma
financial information required pursuant to Article 11 of Regulation S-X. This
Current Report on Form 8-K/A dated February 12, 1999, includes the unaudited
combined statements of revenues and certain expenses for the acquired properties
for the nine months ended September 30, 1998, the previously filed financial
statements for the year ended December 31, 1997 of Park Meadows Mall, Valley
Fair, Fashion Place, The Fashion Show, Westdale Mall and Towson Town Center
specified by Rule 3-14 and the financial statement of acquired real estate
operations specified by Rule 3-14 for Bridgewater Commons.
Bridgewater Commons is a regional shopping center in Bridgewater, New Jersey.
The center was constructed in 1988 and is in very good condition. The center
contains approximately 381,000 square feet of leasable mall space and three
department stores (Lord & Taylor, Macy's and Sterns) totaling 503,000 square
feet of space. The center is leased primarily to high profile, national
retailers, produces sales of approximately $520 per square foot and is 97%
occupied. Substantially all of the tenant leases provide for the recovery of
operating expenses and for contingent rents based on tenant sales levels in
addition to minimum rents. Bridgewater Commons is one of the dominant centers
in its market and the Company intends to operate it so as to maintain its
competitive position. After reasonable inquiry, the Company is not aware of any
material factors that would cause the reported information not to be necessarily
indicative of future operating results of the property.
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, Towson Town Center and Bridgewater Commons adjusted to
give effect to the purchase of such property interests. 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
F-48
<PAGE>
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 September 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 nine months ended September 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.
On February 1, 1999, a subsidiary of the Company completed the establishment of
a joint venture (the "Four State Venture") with a joint venture (the
"Morgan/NYSTRS Venture") consisting of J.P. Morgan Strategic Property Fund
("Morgan") and the New York State Teachers' Retirement System ("NYSTRS"). The
Company subsidiary contributed to Four State Venture its ownership interests in
four of the retail centers (Bridgewater Commons, Fashion Place, Park Meadows
Mall and Towson Town Center) acquired from TrizecHahn. The Morgan/NYSTRS
Venture contributed a total of approximately $271 million in cash to Four State
Venture and received a 65% ownership interest in Four State Venture and Four
State Venture repaid approximately $271 million of Company borrowings under its
bridge loan credit facility. The Company subsidiary retained a 35% interest in
Four State Venture.
The following unaudited pro forma condensed financial statements are also
provided to illustrate the effects of the contribution to Four State Venture of
the Company's ownership interests in the aforementioned properties, and have
been prepared using the equity method of accounting for the Company's investment
in the Four State Venture related to Bridgewater Commons, Park Meadows Mall and
Towson Town Center. The Four State Venture agreement provides for the purchase
by the Company, at the option of the Company or the Morgan/NYSTRS Venture, of
Morgan/NYSTRS Venture's interest in Four State Venture related to Fashion Place
at a specified amount. Accordingly, the ownership interest of the Morgan/NYSTRS
Venture in Fashion Place has been accounted for as a financing transaction in
the pro forma condensed consolidated balance sheet and statements of operations
of the Company. These statements reflect how the balance sheet of The Rouse
Company might have appeared at September 30, 1998 had the Four State Venture
been formed at that date, and how the operations of The Rouse Company for the
year ended December 31, 1997 and the nine months ended September 30, 1998 might
have appeared if the Four State Venture had been formed 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 Four
State Venture been formed 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.
F-49
<PAGE>
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 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-50
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1998
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
The Rouse
The Rouse Purchase Company and
Company and Allocated Financing Subsidiaries
Subsidiaries Purchase Adjustments (Pro Forma
Assets (Historical) Price (Note 1) (Note 2) Combined)
------------ -------------- ------------ -------------
<S> <C> <C> <C> <C>
Property
Operating properties, net........................ $2,997,340 $ 687,736 $ - $3,685,076
Properties in development........................ 204,824 - - 204,824
Properties held for sale......................... 149,552 - - 149,552
---------- ---------- ----------- ----------
Total property............................... 3,351,716 687,736 - 4,039,452
Investments in and advances to
unconsolidated real estate ventures............... 303,415 13,664 - 317,079
Prepaid expenses, receivables under
finance leases and other assets................... 234,420 2,302 - 236,722
Accounts and notes receivable...................... 84,771 292 - 85,063
Investments in marketable securities............... 4,021 - - 4,021
Cash and cash equivalents.......................... 42,102 (381,316) 384,196 44,982
---------- ---------- ----------- ----------
Total........................................ $4,020,445 $ 322,678 $384,196 $4,727,319
========== ========== =========== ==========
Liabilities and Shareholders' Equity
Debt............................................... $3,073,121 $ 324,890 $384,196 $3,782,207
Obligations under capital leases................... 8,246 - - 8,246
Accounts payable, accrued expenses
and other liabilities............................. 268,045 (2,212) - 265,833
Company-obligated mandatorily redeemable
preferred securities of a trust holding
solely Parent Company subordinated
debt securities................................... 137,500 - - 137,500
Shareholders' equity............................... 533,533 - - 533,533
---------- ---------- ----------- ----------
Total........................................ $4,020,445 $ 322,678 $384,196 $4,727,319
========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Contribution Credit The Rouse
of Property Financing Facility Company and
Interests to of Fashion Repayment Subsidiaries
Joint Venture Place Interest Adjustments (Pro Forma
Assets (Note 3) (Note 4) (Note 5) Combined)
-------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Property
Operating properties, net........................ $ (816,085) $ - $ - $2,868,991
Properties in development........................ - - - 204,824
Properties held for sale......................... - - 149,552
-------------- -------------- ------------- ----------
Total property............................... (816,085) - - 3,223,367
Investments in and advances to
unconsolidated real estate ventures............... 343,613 40,780 (271,233) 430,239
Prepaid expenses, receivables under
finance leases and other assets................... (1,781) - - 234,941
Accounts and notes receivable...................... (178) - - 85,485
Investments in marketable securities............... (1,784) - - 2,237
Cash and cash equivalents.......................... 961 - - 45,943
---------- -------------- ------------- ----------
Total........................................ $ (475,254) $ 40,780 $ (271,233) $4,022,212
========== ============== ============= ==========
Liabilities and Shareholders' Equity
Debt............................................... $ (467,618) $ 40,780 $ (271,233) $3,084,136
Obligations under capital leases................... - - - 8,246
Accounts payable, accrued expenses
and other liabilities............................. (7,636) - - 258,797
Company-obligated mandatorily redeemable
preferred securities of a trust holding
solely Parent Company subordinated
debt securities................................... - - - 137,500
Shareholders' equity............................... - - - 533,533
---------- -------------- ------------- ----------
Total........................................ $ (475,254) $ 40,780 $ (271,233) $4,022,212
========== ============== ============= ==========
</TABLE>
The accompanying note are an integral part of these statements.
F-51
<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 6) 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 $ 189,892 $ 19,901 $ 19,147 $(43,146) $ 185,794
operations ========== ============= =============== ======== ==========
Earnings from continuing
operations
per share of common stock after
provision for dividends on
Preferred stock :
Basic $ 2.70
==========
Diluted $ 2.59
==========
Weighted average number of
common shares outstanding:
Basic 66,201
==========
Diluted 76,005
==========
</TABLE>
<TABLE>
<CAPTION>
The Rouse
Company and
Second and Third Closings Subsidiaries
-------------------------------------------------------- (Pro Forma
The Towson Pro Forma Combined as)
Fashion Fashion Westdale Town Adjustments reported in Form
Place Show Mall Center (Note 6) 8-K/A filed 11/16/98
-------- -------- -------- -------- ---------------- ---------------------
<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
======== ======== ======== ======== ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-52
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS, Continued
Year ended December 31, 1997
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Fourth Closing Four State Venture
------------------------- ------------------
The Rouse Company
and Subsidiaries
Pro Forma before contribution to Pro Forma The Rouse Company
Bridgewater Adjustments Four State Venture Adjustments and Subsidiaries
Commons (Note 6) (Pro Forma Combined) (Note 6) (Pro Forma Combined)
----------- ------------ ----------------------- ----------------- --------------------
<S> <C> <C> <C> <C> <C>
Revenues........................ $ 26,322 $ - $1,021,363 $ (82,037) (a) $ 939,326
Operating expenses, exclusive
of provision for bad debts,
depreciation and amortization.. 8,808 895 (a) 561,927 (28,195) (a) 533,732
Interest expense................ - 7,483 (b) 272,069 (32,103) (a) 224,686
10,125 (c) 3,058 (b)
(18,338) (c)
Provision for bad debts......... - - 5,766 - 5,766
Depreciation and amortization... - 4,821 (d) 102,012 (13,075) (a) 88,937
Equity in earnings of
unconsolidated
real estate ventures........... - - - 3,032 (a) 3,032
Gain (loss) on dispositions of
assets and other provisions, - - (24,763) - (24,763)
net........................... ---------- ---------- ---------- ---------- ----------
Earnings from continuing
operations
before income taxes............ 17,514 (23,324) 54,826 9,648 64,474
Income taxes.................... - - (116,066) - (116,066)
---------- ---------- ---------- ---------- ----------
Earnings from continuing $ 17,514 $ (23,324) $ 170,892 $ 9,648 $ 180,540
operations ========== ========== ========== ========== ==========
Earnings from continuing
operations
per share of common stock after
provision for dividends on
Preferred stock :
Basic $ 2.56
==========
Diluted $ 2.46
==========
Weighted average number of
common shares outstanding:
Basic 66,201
==========
Diluted 77,392
==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-53
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months ended September 30, 1998
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
First Closing
-------------------------------------------------------
The Rouse
Company and Park Pro Forma
Subsidiaries Meadows Adjustments
(Historical) Mall Valley Fair (Note 6)
-------------------- --------------- -------------- ----------------------
<S> <C> <C> <C> <C>
Revenues........................ $498,857 $22,553 $19,746 $ (1,766) (b)
(9,873) (h)
Operating expenses, exclusive (9,873) (a)
of provision for bad debts, (5,180) (i)
depreciation and amortization.. 258,220 6,909 5,476 (2,738) (a)
488 (c)
(2,738) (h)
(1,455) (i)
Interest expense................ 139,372 1,240 - 10,434 (d)
6,752 (e)
1,923 (f)
(7,508) (h)
(3,306) (i)
Provision for bad debts......... 3,716 - - -
Depreciation and amortization... 56,713 - - 3,345 (g)
Equity in earnings of (1,069) (i)
unconsolidated real
estate ventures................ 49,928 - - -
Gain (loss) on dispositions of
assets and other
provisions, net................ (5,220) - - -
-------- -------- --------- ----------
Earnings from continuing
operations before
income taxes................... 85,544 14,404 14,270 (30,820)
Income taxes.................... 236 - - -
-------- -------- --------- ----------
Earnings from continuing $ 85,308 $ 14,404 $ 14,270 $ (30,820)
operations..................... ======== ======== ========= ==========
Earnings from continuing
operations per share
of common stock after
provision for dividends on
Preferred stock :
Basic $ 1.12
========
Diluted $ 1.11
========
Weighted average number of
common shares outstanding:
Basic 67,437
========
Diluted 68,562
========
</TABLE>
<TABLE>
<CAPTION>
Second and Third Closings Fourth Closing
--------------------------------------------------- ------------------------ Subsidiaries
before contribution
The Towson Pro Forma Pro Forma to Four State Venture
Fashion Fashion Westdale Town Adjustments Bridgewater Adjustments (Pro Forma
Place Show Mall Center (Note 6) Commons (Note 6) Combined)
------- -------- -------- -------- ----------- ----------- ----------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........................ $8,530 $15,310 $5,660 $18,598 $ (5,660) (a) $18,859 $ - $560,451
(15,310) (b)
Operating expenses, exclusive
of provision for bad debts,
depreciation and amortization.. 2,701 4,229 2,823 5,734 (2,823) (a) 6,376 - 277,590
(1,572) (b)
(4,229) (b)
189 (c)
Interest expense................ - 4,576 1,629 - (1,629) (a) - 7,594 (c) 183,834
(4,576) (b) 5,612 (b)
11,377 (d)
3,907 (e)
7,088 (f)
(651) (h)
Provision for bad debts......... - - - - - - - 3,716
Depreciation and amortization... - - - - 5,042 (g) - 3,616 (d) 67,647
Equity in earnings of
unconsolidated real
estate ventures................ - - - - 446 (a) - - 49,928
(446) (h)
Gain (loss) on dispositions of
assets and other
provisions, net................ - - - - - - - (5,220)
------- -------- -------- -------- -------- ------- -------- --------
Earnings from continuing
operations before
income taxes................... 5,829 6,505 1,208 12,864 (33,093) 12,483 (16,822) 72,372
Income taxes.................... - - - - - - - 236
------- -------- -------- -------- -------- ------- -------- --------
Earnings from continuing $ 5,829 $ 6,505 $ 1,208 $ 12,864 $(33,093) $12,483 $(16,822) $ 72,136
operations..................... ======= ======== ======== ======== ======== ======= ======== ========
Earnings from continuing
operations per share
of common stock after
provision for dividends on
Preferred stock :
Basic $ .93
========
Diluted $ .92
========
Weighted average number of
common shares outstanding:
Basic 67,437
========
Diluted 68,562
========
</TABLE>
The accompanying notes are an integral part of these statements.
F-54
F-54
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months ended September 30, 1998
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Four State Venture The Rouse
-------------------------- Company and
Pro Forma Subsidiaries
Adjustments (Pro Forma
(Note 6) Combined)
-------------------------- -------------------------
<S> <C> <C>
Revenues........................ $ (60,010) (a) $ 500,441
Operating expenses, exclusive
of provision for bad debts,
depreciation and amortization.. (19,507) (a) 258,083
Interest expense................ (23,979) (a) 148,396
2,294 (b)
(13,753) (c)
Provision for bad debts......... - 3,716
Depreciation and amortization... (9,807) (a) 57,840
Equity in earnings of
unconsolidated
real estate ventures........... 2,351 (a) 52,279
Gain (loss) on dispositions of
assets
and other provisions, net...... - (5,220)
---------- ----------
Earnings from continuing
operations
before income taxes............ 7,093 79,465
Income taxes.................... - 236
---------- ----------
Earnings from continuing $ 7,093 $ 79,229
operations..................... ========== ==========
Earnings from continuing
operations
per share of common stock after
provision for dividends on
Preferred stock :
Basic $ 1.03
==========
Diluted $ 1.02
==========
Weighted average number of
common shares outstanding:
Basic 67,437
==========
Diluted 68,562
==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-55
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
Balance Sheet Pro Forma Adjustments
- -----------------------------------
1. Allocated Purchase Price
------------------------
The acquisitions 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, Fashion Place and Bridgewater
Commons, 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. The
Company acquired 100% ownership of Park Meadows Mall and a 50% ownership
interest in Valley Fair on July 31, 1998 and included the acquired assets
and assumed liabilities at their respective fair values in its historical
consolidated balance sheet as of September 30, 1998. Accordingly, the
adjustments to the September 30, 1998 consolidated balance sheet of the
Company for the allocated purchase price exclude these acquisitions. 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 aggregate fair value of the assets acquired and liabilities assumed in
the purchase are $1,154,573,000 and $520,442,000, respectively, including
$703,994,000 and $322,678,000, respectively, relating to the properties
purchased after September 30, 1998. 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. Purchase Financing Adjustment
-----------------------------
The Company used proceeds from additional mortgage debt secured by two of
the properties to pay approximately $68,613,000 of the purchase price and
proceeds from the sale of three office buildings acquired in November 1998
and funded by debt to pay $91,100,000 of the purchase price. The balance
of the net purchase price of $224,483,000 was funded by borrowings under
the Company's unsecured revolving credit and bridge loan facilities.
F-56
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
3. Contribution of Property Interests to Joint Venture
---------------------------------------------------
To record the contribution to Four State Venture of the Company's ownership
interests in Bridgewater Commons, Park Meadows Mall and Towson Town Center.
The contribution will be accounted for as a sale and the fair value of the
joint venture interest received will be considered in the Company's
allocation of the acquisition costs of all of the acquired property
interests. Accordingly, no gain or loss will be recognized on the sale.
The Company's 35% ownership interest in Four State Venture related to these
property interests will be accounted for using the equity method of
accounting.
4. Financing of Fashion Place Interest
-----------------------------------
The Four State Venture agreement provides for the purchase, at the option
of the Company or the Morgan/NYSTRS Venture, of the Morgan/NYSTRS Venture
ownership interest in the Four State Venture related to Fashion Place at a
specified amount. Accordingly, the ownership interest in the Four State
Venture of the Morgan/NYSTRS Venture related to Fashion Place will be
accounted for as a financing transaction until the option expires or a
purchase of the interest occurs. If the option is exercised, the purchase
price will be paid in common stock of the Company.
5. Credit Facility Repayment Adjustment
------------------------------------
Upon formation, Four State Venture assumed an obligation to repay certain
credit facility borrowings of the Company arising out of the Company's
purchase of the property ownership interests from TrizecHahn. The Four
State Venture used approximately $271 million in cash contributed by the
Morgan/NYSTRS Venture to repay these obligations.
6. 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. The
statements also reflect certain adjustments which are explained below to
give effect to the contribution of the acquired property interests to Four
State Venture.
F-57
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
6. Statements of Operations Pro Forma Adjustments, Continued
---------------------------------------------------------
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 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%, the rate in effect at the purchase
date.
(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.
(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.
F-58
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
6. Statements of Operations Pro Forma Adjustments, Continued
---------------------------------------------------------
First Closing, continued
------------------------
(i) Eliminate the effects of actual revenues, operating expenses, interest
expense and depreciation expense related to Park Meadows Mall included
in the Company's historical consolidated statement of operations for
the nine months ended September 30, 1998.
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 nine months ended September 30, 1998
include 100% of the revenues and certain operating expenses and
minority interest participation expense of $2,368,000 and $1,572,000
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%, the rate in
effect at the purchase date.
(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-59
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
6. 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.
Fourth Closing
--------------
(a) Adjust operating expenses for Bridgewater Commons to reflect management
and leasing costs consistent with costs incurred by the Company at
similar retail properties.
(b) Record interest expense incurred on borrowings of $114,596,000 under
the bridge loan and unsecured revolving credit facilities used to fund
a portion of the purchase price. The pro forma interest expense on
these borrowings was calculated using an effective interest rate of
6.52%, the rate in effect at the purchase date.
(c) Record interest expense at an effective rate of 6.75% for a new
mortgage note secured by Bridgewater Commons, the proceeds of which
were used to repay a mortgage note assumed by a subsidiary of the
Company at acquisition and to pay a portion of the purchase price.
(d) Record depreciation and amortization expense for Bridgewater Commons in
accordance with the established accounting policies of the Company.
F-60
<PAGE>
THE ROUSE COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
6. Statement of Operations Pro Forma Adjustments, Continued
--------------------------------------------------------
Four State Venture
------------------
(a) Eliminate revenues, operating expenses, interest expense and
depreciation expense related to Bridgewater Commons, Park Meadows Mall
and Towson Town Center and record the Company's equity in the earnings
of the Four State Venture related to these properties.
(b) Record the Morgan/NYSTRS Venture's participation in the earnings of
Fashion Place as interest expense.
(c) Adjust interest expense on certain credit facility borrowings of the
Company repaid by Four State Venture. Interest on these borrowings was
calculated using an effective interest rate of 6.76%.
F-61
<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, 33-57707
and 333-67137), Form S-8 (File Nos. 2-83612, 33-56231, 33-56233, 33-56235 and
333-32277) and Form S-4 (File No. 333-01693) 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 the statement of revenues and certain expenses of the
Valley Fair Property for the year ended December 31, 1997, 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, and our report
dated June 15, 1998, on our audit of the statement of revenues and certain
expenses of the Bridgewater Commons Property, which reports are included in this
filing on Form 8-K/A.
PRICEWATERHOUSECOOPERS LLP
Newport Beach, California
February 16, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
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, 33-57707
and 333-67137), Form S-8 (File Nos. 2-83612, 33-56231, 33-56233, 33-56235 and
333-32277) and Form S-4 (File No. 333-01693) 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 and our reports dated June 8,
1998, on our audits of the statements of revenue and certain expenses of Towson
Town Center and Westdale Mall for the year ended December 31, 1997, which
reports are included in this filing on form 8-K/A. Our reports include a
paragraph that states that the statements were prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission as described in the applicable notes and are not intended to be a
complete presentation of revenues and expenses.
KPMG LLP
Baltimore, Maryland
February 16, 1999
