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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITITES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31,1998
or
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
Commission File NO 0-1743
THE ROUSE COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 52-0735512
-------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION IDENTIFICATION NO.)
10275 LITTLE PATUXENT PARKWAY
COLUMBIA, MARYLAND 21044-3456
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (410) 992-6000
--------------
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- ---------------------
Common Stock (par value 1 cent per share) New York Stock Exchange
- ----------------------------------------
9 1/4% Cumulative Quarterly Income Preferred Securities New York Stock Exchange
- -------------------------------------------------------
Series B Convertible Preferred Stock
- -------------------------------------
(par value 1 cent per share) New York Stock Exchange
- ------------------------------
Securities registered pursuant to Section 12(g) of the Act:
NONE
----
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months for (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
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As of March 17, 1999, there were outstanding 72,256,106 shares of the
registrant's common stock, par value 1 cent, which is the only class of common
or voting stock of the registrant. As of that date, the aggregate market value
of the shares of common stock held by nonaffiliates of the registrant (based on
the closing price as reported in The Wall Street Journal, Eastern Edition) was
----------------------------------------
approximately $1,634,126,080
Documents Incorporated by Reference
The specified portions of the Annual Report to Shareholders for the fiscal year
ended December 31, 1998 are incorporated by reference into Parts I, II, and IV.
Definitive Proxy Statement to be filed pursuant to Regulation 14A on or before
April 12, 1999 is incorporated by reference into Part III.
Part I
------
Item 1. Business.
Item 1 (a). General Development of Business.
The Rouse Company (the "Company") was incorporated as a business corporation
under the laws of the State of Maryland in 1956. Its principal offices are
located at The Rouse Company Building, Columbia, Maryland 21044. Its
telephone number is (410) 992-6000. The Company, through its subsidiaries,
affiliates and "Non-REIT Subsidiaries" (as defined below), is engaged or
has a material financial interest in (i) the ownership, management,
acquisition and development of income-producing and other real estate in
the United States, including retail centers, office buildings, mixed-use
projects and community retail centers, and the management of one retail
center in Canada, and (ii) the development and sale of land in Maryland and
the Las Vegas, Nevada metropolitan area for residential, commercial and
industrial uses. "Non-REIT Subsidiaries" are companies as to which
substantially all (at least 98%) of the financial interest is held by the
Company, but in which The Rouse Company Incentive Compensation Statutory
Trust, an entity that is neither owned nor controlled by the Company, owns
91% of the voting stock.
In December 1997, the Company determined that it would elect to be taxed as a
real estate investment trust (REIT) effective January 1, 1998. The Company
believes that it met the qualifications for REIT status during 1998, and it
intends to continue to meet the qualifications in the future and to
distribute at least 100% of its REIT taxable income (determined after
taking into account any net operating loss deduction) to stockholders.
Accordingly, management does not believe that the Company will be liable
for payment of income taxes (except, possibly, in certain states).
Developments in 1998 and Early 1999
During the third and fourth quarters of 1998, subsidiaries of the Company
purchased ownership interests in seven retail centers from TrizecHahn
Centers Inc. for approximately $1.2 billion. The centers are Park Meadows
Mall in suburban Denver, Colorado, Towson Town Center in suburban
Baltimore, Maryland, The Fashion Show on "The Strip" in Las Vegas, Nevada
(in which a Company subsidiary already held a 75% ownership interest),
Fashion Place in Salt Lake City, Utah, Bridgewater Commons Mall in
Bridgewater, New Jersey, Valley Fair in San Jose, California and Westdale
Mall in Cedar Rapids, Iowa. Upon completion of the acquisitions,
I-1
subsidiaries of the Company held 100% ownership interests in these centers,
except that the subsidiaries held a 50% interest in Valley Fair and a 20.5%
interest in Westdale Mall. At the time of the acquisitions, the Company
decided to hold for sale its interests in Valley Fair and Westdale Mall.
On November 30, 1998, a wholly owned subsidiary of the Company acquired for
approximately $373 million, from Teachers Properties, Inc. ("Teachers") its
interest in Rouse-Teachers Properties, Inc. ("RTPI"), an entity in which
Teachers held a 95% ownership interest and the Company held a 5% ownership
interest. The acquired assets of RTPI consisted of 22 office buildings in
metropolitan Baltimore, Maryland containing approximately 1,034,000 square
feet of leasable space, 26 industrial buildings in metropolitan Baltimore
containing approximately 1,675,000 square feet of leasable space, 8 office
buildings in Columbia, Maryland containing approximately 428,000 square
feet of leasable space, 10 office buildings in metropolitan Washington,
D.C. containing 1,227,000 square feet of leasable space, an office building
in suburban Harrisburg, Pennsylvania containing approximately 231,000
square feet of leasable space and approximately 107 saleable acres of land
in the Baltimore and Washington metropolitan areas. The Company sold three
of the acquired buildings in metropolitan Washington, D.C. on December 1,
1998 for an aggregate price of approximately $91 million.
On February 1, 1999, a wholly owned subsidiary of the Company completed the
establishment of a joint venture (the "Four State Venture"), relating to
four retail centers, with a venture (the "Morgan/NYSTRS Venture")
consisting of the J.P. Morgan Strategic Property Fund and the New York
State Teachers' Retirement System. The centers, all of which were acquired
in 1998 from TrizecHahn Centers Inc., are Park Meadows Mall, Towson Town
Center, Fashion Place and Bridgewater Commons Mall. The total cost of the
retail center assets and related liabilities contributed to the Four State
Venture was approximately $957 million and $542 million, respectively. The
Morgan/NYSTRS Venture made a $271 million cash contribution to the Four
State Venture, which is approximately 65% of the net cost. The Company
subsidiary effectively has a 35% ownership interest in the Four State
Venture, while the Morgan/NYSTRS Venture has a 65% ownership interest.
I-2
Additional information regarding the above developments is contained in the
Company's Current Report on Form 8-K/A, filed on November 16, 1998, the
Company's Current Report on Form 8-K, filed on December 14, 1998, the
Company's Current Report on Form 8-K, filed on February 10, 1999, and the
Company's Current Report on Form 8-K/A, filed on February 16, 1999.
Item 1(b). Financial Information About Industry Segments.
Information required by Item 1(b) is incorporated herein by reference to note
9 of the notes to consolidated financial statements included in the 1998
Annual Report to Shareholders.
As noted in Item 1(a), the Company is a real estate company engaged, through
its subsidiaries, affiliates and having a material financial interest,
through its Non-REIT Subsidiaries, in most aspects of the real estate
industry, including the management, acquisition and development of income-
producing and other properties, both retail and commercial, community
development and management, and land development. These business segments
are further described below.
Item 1(c). Narrative Description of Business.
Retail Centers:
--------------
As set forth in Item 2, at December 31, 1998, the 49 regional retail centers
owned, in whole or in part, or operated by subsidiaries or affiliates of
the Company or by Non-REIT Subsidiaries, aggregated 44,006,000 square feet,
including 26,147,000 square feet owned by or leased to department stores.
The activities involved in operating and managing retail centers include:
negotiating lease terms with present and prospective tenants, identifying
and attracting desirable new tenants, conducting local market and consumer
research, developing and implementing short- and long-term merchandising
and leasing programs, assisting tenants in the presentation of their
merchandise and the layout of their stores and store fronts, and
maintaining the building and common areas.
In conjunction with other partners or investors, the Company, through its
subsidiaries and affiliates and Non-REIT subsidiaries, acquires interests
in completed retail centers, with the Company (or, beginning December 31,
1997, its Non-REIT Subsidiaries) having management responsibility and
earning incentive fees including, in some instances, equity interests in
the centers. Affiliates of the Company (or, beginning December 31, 1997,
Non-REIT Subsidiaries)
I-3
also provide management services for centers developed and owned by others
under management agreements that also provide for incentive fees and, in
some instances, equity interests in the centers. As of December 31, 1998,
Non-REIT Subsidiaries of the Company managed 9 such centers, which are
included in the figures in the preceding paragraph and aggregated 8,778,000
square feet of leasable space, 5,098,000 square feet of which was
department store space.
The Howard Research And Development Corporation ("HRD", a Non-REIT Subsidiary
of the Company) and its subsidiaries own and/or manage 12 community retail
centers with 890,000 square feet of leasable space, The Mall in Columbia
(which is included in the second preceding paragraph) and other properties
in Columbia, Maryland. Howard Hughes Properties, Limited Partnership
("HHPLP", a majority owned affiliate of the Company) and its subsidiaries
and affiliates own interests in 2 community retail centers with 238,000
square feet of leasable space in Summerlin, Nevada.
Office, Mixed-Use and Other Properties:
- --------------------------------------
HHPLP and its subsidiaries and affiliates own and/or manage 61 office and
industrial buildings with 3,914,000 square feet of leasable space, and
other properties in and around Las Vegas, Nevada and Los Angeles,
California. HRD and its subsidiaries own and/or manage 12 office and
industrial buildings with 1,188,000 square feet of leasable space and other
properties in Columbia, Maryland.
Other subsidiaries of the Company own and operate 5 mixed-use projects with a
total of 691,000 square feet of leasable retail space, a 90,000 square foot
cinema and 1,891,000 square feet of leasable office space. Other
subsidiaries of the Company own, in whole or in part, 72 office and
industrial buildings with a total of 4,909,000 square feet of leasable
space.
The activities involved in operating and managing office, mixed-use and other
properties include: negotiating lease terms with present and prospective
tenants, identifying and attracting desirable new tenants, conducting local
market and consumer research, developing and implementing short- and long-
term merchandising and leasing programs, assisting tenants in the
presentation of their merchandise and the layout of their stores and store
fronts, and maintaining the building and common areas.
Development:
- -----------
The Company, through its subsidiaries, affiliates and Non-REIT subsidiaries
renovates and expands existing retail centers and develops suburban and
downtown retail centers, mixed-
I-4
use projects and master-planned business parks, primarily for ownership. In
addition, the Company is capable of serving as the master developer for
certain mixed-use projects, with the Company generally owning at least the
retail component of such projects. The activities involved in the
development, renovation and expansion of retail centers, mixed-use projects
and master-planned business parks include: initial market and consumer
research, evaluating and acquiring land sites, obtaining necessary public
approvals, engaging architectural and engineering firms to design the
project, estimating development costs, developing and testing pro forma
operating statements, selecting a general contractor, arranging
construction and permanent financing, identifying and obtaining department
stores and other tenants, negotiating lease terms, negotiating partnership
and joint venture agreements and promoting new, renovated or expanded
retail centers, mixed-use projects and master-planned business parks.
The Company and certain subsidiaries, affiliates and Non-REIT Subsidiaries are
in the construction or development stage of announced projects, primarily
the development of new retail centers, expansions of existing retail
centers and mixed-use projects, and expansions of existing master-planned
business parks in Las Vegas, Nevada.
Land Sales Operations:
- ---------------------
HRD, a Non-REIT Subsidiary of the Company, is the developing entity of Columbia,
Maryland, which is located in the Baltimore-Washington corridor. HRD owns
approximately 1,600 salable acres of land in and around Columbia, and,
through its subsidiaries and affiliates, develops and sells this land to
builders and other developers for residential, commercial and industrial
uses. The Hughes Corporation and Howard Hughes Properties, Inc.
(collectively "Hughes", Non-REIT Subsidiaries of the Company) and their
subsidiaries and affiliates are the developers of Summerlin, Nevada, which
is located immediately north and west of Las Vegas, Nevada. Hughes owns
approximately 8,700 salable acres of land in Summerlin, and develops and
sells this land to builders and other developers for residential and
commercial uses. Other affiliates or subsidiaries of the Company may also
purchase some of this land for their own development purposes. Non-REIT
Subsidiaries of the Company, directly or through affiliates, are also
presently involved in community development and related land sales
elsewhere in Maryland, and are developing or holding for sale parcels of
land elsewhere in Nevada and California.
In all aspects of the Company's business pertaining to the ownership,
management, acquisition or development of income-producing and other real
estate, the Company and its subsidiaries, affiliates and Non-REIT
Subsidiaries operate
I-5
in highly competitive markets. With respect to the leasing and operation or
management of developed properties, each project faces market competition
from existing and future developments in its geographical market area.
The Company's affiliates and Non-REIT Subsidiaries also face competition in and
around Columbia, Maryland and Las Vegas, Nevada with respect to the
development and sale of land for residential, commercial and industrial
uses.
Neither the Company's business, taken as a whole, nor any of its operating
segments, is seasonal in nature.
Federal, state and local statutes and regulations relating to the protection of
the environment have previously had no material effect on the Company's
business. Future development opportunities of the Company may involve
additional capital and other expenditures in order to comply with such
statutes and regulations. It is impossible at this time to predict with
any certainty the magnitude of any such expenditures or the long-range
effect, if any, on the Company's operations. Compliance with such laws has
had no material adverse effect on the operating results or competitive
position of the Company in the past; the Company anticipates that they will
have no material adverse effect on its future operating results or its
competitive position in the industry.
None of the Company's operating segments depends upon a single customer or a few
customers, the loss of which would have a materially adverse effect on the
segment. No customer accounts for 10 percent or more of the consolidated
revenues of the Company.
The Company, its subsidiaries and affiliates and Non-REIT Subsidiaries employed
4,126 full-time and part-time employees at December 31, 1998.
I-6
Item 2. Properties.
The Company leases its headquarters building (approximately 127,000 square feet)
in Columbia, Maryland for an initial term of 30 years which expires in 2003
with options for two 15-year renewal periods. The lease on the
headquarters building is accounted for as a capital lease.
Information respecting the Company's operating properties is incorporated herein
by reference to the "Projects of The Rouse Company" table in pages 50
through 53 of Exhibit 13 to this Form 10-K. The ownership of virtually all
properties is subject to mortgage financing. The table of projects
includes properties managed by Non-REIT Subsidiaries of the Company for a
fee as identified in notes (c) and (d) to the table. Excluding such
managed properties, certain of the remaining properties are subject to
leases which provide an option to purchase (or repurchase) the property
and/or to renew the leases for one or more renewal periods. The years of
expiration indicated below assume all options to extend the terms of leases
are exercised. The properties subject to such leases in whole or part
(including properties owned by Non-REIT Subsidiaries) are as follows:
Nature of Year of expiration
Property interest of lease
-------- -------- --------
Arizona Center Leasehold Various dates from
2017 to 2050
Augusta Mall Leasehold 2068
Bayside Marketplace Leasehold by joint venture 2062
Columbia Mall, Inc. - Leasehold and fee 2000
American City Building
Columbia Mall, Inc. - Leasehold and fee 2012
Exhibit Building
Columbia Mall, Inc. - Leasehold 2062
Oakland Building
Echelon Mall Leasehold 2008
Faneuil Hall Marketplace Leasehold 2074
Fashion Place Mall Leasehold 2059
First National Bank Plaza Leasehold 2013
Franklin Park Leasehold and fee by joint 2024
venture
The Gallery at Market East Leasehold 2082
I-7
Item 2. Properties, continued.
Nature of Year of expiration
Property interest of lease
-------- -------- --------
Governor's Square Leasehold 2054
Harborplace Leasehold 2054
Highland Mall Leasehold and fee by joint 2070
venture
The Jacksonville Landing Leasehold 2057
Mall St. Matthews Leasehold 2053
Midtown Square Leasehold 2055
Pioneer Place Leasehold 2076
Plymouth Meeting Leasehold 2063
Riverwalk Leasehold and fee by joint 2076
venture
South Street Seaport Leasehold 2031
Tampa Bay Center Leasehold and fee by joint 2047
venture
Westlake Center Leasehold by joint venture 2043
I-8
Item 3. Legal Proceedings.
None.
I-9
Item 4. Submission of Matters to a Vote of Security Holders.
None.
I-10
Executive Officers of the Registrant.
The executive officers of the Company as of March 26, 1999 are:
Present office and Date of election Business or professional
position with the or appointment to experience during the past
Executive Officer Age Company present office five years
- ----------------- --- ------------------ ----------------- ---------------------------
Anthony W. Deering 54 Chairman of the Board, 2/25/97 Chairman of the Board, President and
President and 2/25/93 Chief Executive Officer of the Company;
Chief Executive Officer 2/23/95 formerly President and Chief Executive
Officer of the Company; President and
Chief Operating Officer of the Company
Jeffrey H. Donahue 52 Executive Vice-President 12/3/98 Executive Vice-President and Chief Financial
and Chief Financial Officer 9/23/93 Officer of the Company; formerly Senior Vice-
President and Chief Financial Officer of the
Company
Duke S. Kassolis 47 Senior Vice-President 9/23/93 Senior Vice-President and Director of
and Director of Office 8/17/93 Office and Mixed-Use Operations of the
and Mixed-Use Operations Company
Paul I. Latta, Jr. 55 Senior Vice-President 9/23/93 Senior Vice-President and Director of
and Director of Retail 8/17/93 Retail Operations of the Company
Operations
Douglas A. McGregor 56 Vice Chairman and Chief 12/3/98 Vice Chairman and Chief Operating Officer;
Operating Officer formerly Executive Vice-President for
Development and Operations of the Company
Robert Minutoli 48 Senior Vice-President 9/23/93 Senior Vice-President and Director of
and Director of 8/17/93 New Business of the Company
New Business
I-11
Executive Officers of the Registrant.
Present office and Date of election Business or professional
position with the or appointment to experience during the past
Executive Officer Age Company present office five years
- ------------------ --- ------------------------- ----------------- --------------------------------
Robert D. Riedy 53 Senior Vice-President 9/23/93 Senior Vice-President and Director of
and Director of Retail 8/17/93 Retail Leasing of the Company
Leasing
Alton J. Scavo 52 Senior Vice-President and 9/23/93 Senior Vice-President and Director of
Director of the 8/17/93 the Community Development Division of
Community Development the Company and General Manager of
Division and General Columbia
Manager of Columbia
Jerome D. Smalley 49 Executive Vice-President 12/3/98 Executive Vice-President - Development;
- Development formerly Senior Vice-President and Director
of the Commercial and Office Development
Division of the Company
The term of office of each officer is until election of a successor or otherwise
at the pleasure of the Board of Directors.
There is no arrangement or understanding between any of the above-listed
officers and any other person pursuant to which any such officer was elected as
an officer, except with respect to Anthony W. Deering. See Exhibit 10 to this
Form 10-K.
None of the above-listed officers has any family relationship with any director
or other executive officer.
I-12
Part II
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Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
Information required by Item 5 is incorporated herein by reference to
page 35 of Exhibit 13.
Item 6. Selected Financial Data.
Information required by Item 6 is incorporated by reference to
page 34 of Exhibit 13.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Information required by Item 7 is incorporated herein by reference to
pages 36 through 49 of Exhibit 13.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Information required by Item 7A is incorporated herein by reference to
pages 45 and 46 of Exhibit 13.
Item 8. Financial Statements and Supplementary Data.
Financial Statements required by Item 8 are set forth in the Index to
Financial Statements and Schedules on page IV-2.
Supplementary data required by Item 8 are incorporated herein by
reference to page 35 of Exhibit 13.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
II-1
Part III
--------
The information required by Items 10, 11, 12 and 13 (except that information
regarding executive officers called for by Item 10 that is contained in Part I)
is incorporated herein by reference from the definitive proxy statement that the
Company intends to file pursuant to Regulation 14A on or before April 12, 1999.
III-1
Part IV
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Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. and 2. Financial Statements and Schedules:
Reference is made to the Index to Financial Statements and Schedules
on page IV-2.
(b) Reports on Form 8-K:
Current Report on Form 8-K/A filed October 9, 1998, disclosing
financial statements required under Rule 3-14 of Regulation S-X and
certain pro forma financial information.
Current Report on Form 8-K filed October 21, 1998, disclosing
acquisition of assets.
Current Report on Form 8-K filed November 5, 1998, disclosing
acquisition of assets.
Current Report on Form 8-K/A filed November 16, 1998, disclosing
financial statements required under Rule 3-14 of Regulation S-X and
certain pro forma financial information.
Current Report on Form 8-K filed December 14, 1998, disclosing
acquisition of assets.
Current Report on Form 8-K filed December 18, 1998, disclosing
acquisition of assets.
(c) Exhibits required by Item 601 of Regulation S-K.
Exhibit Index
Exhibit No.
-----------
3 Articles of Incorporation and Bylaws
10 Material Contracts
12.1 Ratio of earnings to fixed charges
12.2 Ratio of earnings to combined fixed charges and Preferred
stock dividend requirements
13 Annual report to security holders
21 Subsidiaries of the Registrant
23.1 Consent of KPMG LLP, Independent Auditors
23.2 Consent of KPMG LLP, Independent Auditors
24 Power of Attorney
27 Financial Data Schedule
99 Additional Exhibits:
99.1 Form 11-K Annual Report of The Rouse Company Savings
Plan for the year ended December 31, 1998
99.2 Factors affecting future operating results
(d) Separate Financial Statements and Schedules of Subsidiaries not
consolidated:
Reference is made to the Index to Financial Statements and Schedules
on page IV-2.
IV-1
The Rouse Company
Index to Financial Statements and Schedules
Page
----
Independent Auditors' Report IV-3
Financial Statements:
The Rouse Company and Subsidiaries included on pages 4 through 35
of Exhibit 13 incorporated herein by reference:
Consolidated Balance Sheets at December 31, 1998 and 1997
Consolidated Statements of Operations and Comprehensive Income
for the Years Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Changes in Shareholders' Equity for
the Years Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
Schedules:
Real Estate Ventures Owned by The Rouse Company Incentive
Compensation Statutory Trust and The Rouse Company:
Independent Auditors' Report IV-4
Combined Consolidated Balance Sheet at December 31, 1998 IV-5
Combined Consolidated Statement of Operations for the Year Ended
December 31, 1998 IV-6
Combined Consolidated Statement of Changes in Shareholders'
Equity for the Year Ended December 31, 1998 IV-7
Combined Consolidated Statement of Cash Flows for the Year Ended
December 31, 1998 IV-8
Notes to Combined Consolidated Financial Statements IV-10
The Rouse Company and Subsidiaries as of December 31, 1998 or for
the years ended December 31, 1998, 1997 and 1996:
Schedule II Valuation and Qualifying Accounts IV-19
Schedule III Real Estate and Accumulated Depreciation IV-20
Schedule IV Mortgage Loans on Real Estate IV-35
Real Estate Ventures Owned by The Rouse Company Incentive
Compensation Statutory Trust and The Rouse Company as of
December 31, 1998 or for the Year Ended December 31, 1998:
Schedule II Valuation and Qualifying Accounts IV-37
Schedule III Real Estate and Accumulated Depreciation IV-38
All other schedules have been omitted as not applicable or not
required, or because the required information is included in
the related financial statements or notes thereto.
IV-2
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Shareholders
The Rouse Company:
We have audited the consolidated financial statements and the related
financial statement schedules of The Rouse Company and subsidiaries as listed
in the accompanying index except for those schedules relating to the Real
Estate Venture owned by The Rouse Company Incentive Compensation Statutory
Trust and The Rouse Company. These consolidated financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Rouse
Company and subsidiaries as of December 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedules referred to above, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
KPMG LLP
Baltimore, Maryland
February 24, 1999
IV-3
INDEPENDENT AUDITORS' REPORT
The Board of Trustees
The Rouse Company Incentive Compensation Statutory Trust
and
The Board of Directors
The Rouse Company:
We have audited the accompanying combined consolidated financial statements and
the related financial statement schedules of Real Estate Ventures owned by The
Rouse Company Incentive Compensation Statutory Trust and The Rouse Company as
listed in the accompanying index. These combined consolidated financial
statements and financial statement schedules are the responsibility of the
Ventures' management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Real Estate
Ventures owned by The Rouse Company Incentive Compensation Statutory Trust and
The Rouse Company as of December 31, 1998, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic combined
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
KPMG LLP
Baltimore, Maryland
February 24, 1999
IV-4
Real Estate Ventures Owned by
The Rouse Company Incentive Compensation Statutory Trust and
The Rouse Company
COMBINED CONSOLIDATED BALANCE SHEET
December 31, 1998
(in thousands)
Assets
--------
Property (notes 2, 5, and 11):
Operating properties:
Property and deferred costs of projects.............. $326,860
Less accumulated depreciation and amortization....... 82,390
--------
244,470
Properties in development............................... 66,442
Investment land and land held for development and sale.. 278,155
--------
Total property....................................... 589,067
Accounts and notes receivable, including advances to
The Rouse Company of $112,310 (note 3)................... 187,046
Deferred income taxes (note 6)............................ 53,660
Prepaid expenses and other assets......................... 31,276
Investments in unconsolidated real estate ventures........ 32,765
--------
Total................................................... $893,814
========
Liabilities and Shareholders' Equity (Deficit)
----------------------------------------------
Liabilities:
Debt (note 5):
Borrowings from The Rouse Company....................... $ 488,363
Other borrowings........................................ 332,945
---------
Total debt........................................... 821,308
---------
Bank overdraft............................................ 17,382
Deferred revenue.......................................... 79,576
Accounts payable, accrued expenses and other liabilities.. 19,286
Redeemable Series A Preferred stock (note 8).............. 50,000
Commitments and contingencies (notes 9, 11 and 12)
Shareholders' equity (deficit) (note 1):
Common stock.............................................. 5
Additional paid-in capital................................ 141,495
Accumulated deficit....................................... (235,238)
---------
Net shareholders' deficit............................... (93,738)
---------
Total................................................... $ 893,814
=========
The accompanying notes are an integral part of these statements.
IV-5
Real Estate Ventures Owned by
The Rouse Company Incentive Compensation Statutory Trust and
The Rouse Company
COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
Year ended December 31, 1998
(in thousands)
Revenues:
Land sales............................................... $165,461
Rentals and tenant services (note 9)..................... 73,811
Property management fees................................. 18,254
Golf club operations..................................... 14,938
Other (note 3)........................................... 9,546
--------
282,010
Cost of land sales and related administration.............. 97,169
Other operating expenses, exclusive of provision for bad
debts, depreciation and amortization (notes 4 and 10).... 63,822
Interest expense (note 5).................................. 68,146
Provision for bad debts.................................... 359
Depreciation and amortization (note 2)..................... 10,585
Equity in earnings of unconsolidated real estate ventures.. 811
Gain on dispositions of assets, net (note 7)............... 15,856
--------
Earnings before income taxes and extraordinary losses.... 58,596
--------
Income taxes, primarily federal (note 6):
Current.................................................. 5,478
Deferred................................................. 16,582
--------
22,060
--------
Earnings before extraordinary losses..................... 36,536
Extraordinary losses, net (note 5)......................... 1,127
--------
Net earnings............................................. $ 35,409
========
The accompanying notes are an integral part of these statements.
IV-6
Real Estate Ventures Owned by
The Rouse Company Incentive Compensation Statutory Trust and
The Rouse Company
COMBINED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
Year ended December 31, 1998
(in thousands)
Additional
Common paid-in Accumulated
stock capital deficit Total
------ ---------- ------------ ----------
Balance at December 31, 1997...... $5 $141,495 $(265,797) $(124,297)
Net earnings...................... -- -- 35,409 35,409
Dividends declared-common stock... -- -- (4,850) (4,850)
------ ---------- --------- ---------
Balance at December 31, 1998 $5 $141,495 $(235,238) $(93,738)
====== ========== ========= =========
The accompanying notes are an integral part of these statements.
IV-7
Real Estate Ventures Owned by
The Rouse Company Incentive Compensation Statutory Trust and
The Rouse Company
COMBINED CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31, 1998
(in thousands)
Cash flows from operating activities
Rents and other revenues received............................... $ 107,533
Proceeds from land sales........................................ 124,152
Interest received............................................... 479
Land development expenditures................................... (82,917)
Operating expenditures.......................................... (88,965)
Interest paid................................................... (69,017)
Income taxes paid............................................... (2,997)
---------
Net cash used by operating activities......................... (11,732)
---------
Cash flows from investing activities
Expenditures for properties in development and improvements to
existing properties funded by debt............................ (78,464)
Expenditures for property acquisitions.......................... (10,054)
Proceeds from sales of operating properties..................... 69,063
Other........................................................... (624)
---------
Net cash used by investing activities......................... (20,079)
---------
Cash flows from financing activities
Proceeds from issuance of property debt......................... 97,005
Repayments of property debt:
Scheduled principal payments.................................. (5,433)
Other payments................................................ (23,834)
Proceeds from issuance of other debt............................ 13,794
Repayments of other debt........................................ (47,483)
Increase in bank overdraft...................................... 2,984
Dividends paid.................................................. (4,850)
Other........................................................... (372)
---------
Net cash provided by financing activities..................... 31,811
---------
Net change in cash and cash equivalents......................... ---
Cash and cash equivalents at beginning of year.................. ---
---------
Cash and cash equivalents at end of year........................ $ ---
=========
The accompanying notes are an integral part of these statements.
IV-8
Reconciliation of Net Earnings to Net Cash
Used by Operating Activities
Net earnings................................................. $ 35,409
Adjustments to reconcile net earnings to net cash
used by operating activities:
Depreciation and amortization.............................. 10,585
Gain on dispositions of assets, net........................ (15,856)
Extraordinary losses, net.................................. 1,127
Provision for bad debts.................................... 359
Decrease (increase) in:
Accounts and notes receivable........................... (42,950)
Other assets............................................ 2,264
Increase in accounts payable, accrued expenses
and other liabilities................................... 5,069
Deferred income taxes...................................... 16,582
Other, net................................................. (24,321)
--------
Net cash used by operating activities $(11,732)
========
- ------------------------------------------------------------------------
Schedule of Noncash Investing and Financing Activities
Debt assumed by purchasers of land $14,836
=======
IV-9
Real Estate Ventures Owned by
The Rouse Company Incentive Compensation Statutory Trust and
The Rouse Company
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
(1) Summary of (a) Basis of presentation
significant The combined consolidated financial statements include the accounts of the real
accounting policies estate ventures (Ventures) owned by The Rouse Company Incentive Compensation
Statutory Trust (Trust) and The Rouse Company (Company). These ventures include
the following entities:
. The Howard Research And Development Corporation and subsidiaries
. The Hughes Corporation and subsidiaries
. Howard Hughes Properties, Inc.
. Rouse Property Management, Inc.
. HRD Properties, Inc. and subsidiaries
The combined consolidated financial statements also include the accounts of
partnerships in which the Ventures have majority interest and control.
Investments in other entities are accounted for using the equity method.
Significant intercompany balances and transactions are eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and judgments that
affect the reported amounts of assets and liabilities and disclosures of
contingencies at the date of the financial statements and revenues and expenses
recognized during the reporting period. Significant estimates are inherent in
the preparation of the Ventures' financial statements. Actual results could differ
from those estimates.
The Ventures were initiated on December 31, 1997, when certain wholly owned
subsidiaries of the Company issued 91% of their voting common stock to the Trust,
an entity which is neither owned nor controlled by the Company, for an aggregate
consideration of $1,400,000. These sales were made at fair value and as part of
the Company's plan to meet the qualifications for status as a Real Estate
Investment Trust (REIT). The Company retained the remaining voting stock of the
Ventures and holds all outstanding shares of nonvoting common and/or preferred
stock and, in certain cases, mortgage loans receivable from the Ventures which,
taken together, comprise substantially all (at least 98%) of the financial
interest in them.
Due to the Company's continuing financial interest in the Ventures, the Ventures
retained the Company's historical cost basis of the assets acquired and
liabilities assumed on the date of sale of their voting common stock to the
Trust. The condensed, combined consolidated balance sheet of the Ventures at
December 31, 1997, is summarized as follows (in thousands):
Assets:
Operating properties, net................................................. $ 211,385
Properties in development................................................. 23,144
Investment land and land held for development and sale.................... 266,477
Properties held for sale.................................................. 46,289
Advances to the Company................................................... 131,832
Other..................................................................... 169,876
----------
Total................................................................... $ 849,003
==========
Liabilities and shareholders' deficit:
Borrowings from the Company............................................... $ 538,586
Other borrowings.......................................................... 280,595
Other liabilities......................................................... 104,119
Redeemable Series A Preferred stock....................................... 50,000
Shareholders' deficit..................................................... (124,297)
----------
Total................................................................... $ 849,003
==========
(b) Description of business
Through their subsidiaries and affiliates, the Ventures acquire, develop and/or
manage income-producing properties and develop and sell land for residential,
commercial and other uses. The income-producing properties consist of retail
centers and office and industrial properties. The retail centers include The
Mall in Columbia, a regional shopping center in Columbia, Maryland, and several
community shopping centers, in the Columbia area. The office and industrial
properties are located in Columbia. Land development and sales operations are
predominantly related to large-scale, long-term community development projects in
Columbia and Summerlin, Nevada.
IV-10
(c) Property
Properties to be developed or held and used in operations are carried at cost
reduced for impairment losses, where appropriate. Properties held for sale are
carried at cost reduced for valuation allowances, where appropriate.
Acquisition, development and construction costs of properties in development and
land development projects are capitalized including, where applicable, salaries
and related costs, real estate taxes, interest and preconstruction costs. The
preconstruction stage of development of an operating property (or an expansion of
an existing property) includes efforts and related costs to secure land control
and zoning, evaluate feasibility and complete other initial tasks which are
essential to development. These costs are transferred to construction and
development in progress when the preconstruction tasks are completed. Provision
is made for potentially unsuccessful preconstruction efforts by charges to
operations. Development and construction costs and costs of significant
improvements, replacements and renovations at operating properties are
capitalized, while costs of maintenance and repairs are expensed as incurred.
Direct costs associated with financing and leasing of operating properties are
capitalized as deferred costs and amortized over the periods benefited by the
expenditures.
Depreciation of operating properties is computed using the straight-line method.
Properties are generally depreciated using composite lives ranging from 40 to 55
years producing effective annual rates of depreciation ranging from 1.6% to 2.5%.
If events or circumstances indicate that the carrying value of an operating
property to be held and used or a land development project may be impaired, a
recoverability analysis is performed based on estimated nondiscounted future cash
flows to be generated from the property or project. If the analysis indicates
that the carrying value is not recoverable from future cash flows, the property
or project is written down to estimated fair value and an impairment loss is
recognized.
Properties held for sale are carried at the lower of their carrying values (i.e.,
cost less accumulated depreciation and any impairment loss recognized, where
applicable) or estimated fair values less costs to sell. The net carrying values
of operating properties are classified as properties held for sale when marketing
of the properties for sale is authorized by management. Depreciation of these
properties is discontinued at that time, but operating revenues, interest and
other operating expenses continue to be recognized until the date of sale.
(d) Sales of property
Gains from sales of operating properties and revenues from land sales are
recognized using the full accrual method provided that various criteria relating
to the terms of the transactions and any subsequent involvement by the Ventures
with the properties sold are met. Gains or revenues relating to transactions
which do not meet the established criteria are deferred and recognized when the
criteria are met or using the installment or cost recovery methods, as
appropriate in the circumstances. For land sale transactions under terms of
which the Ventures are required to perform additional services and incur
significant costs after title has passed, revenues and costs of sales are
recognized proportionately on a percentage of completion basis.
Cost of land sales is generally determined as a specified percentage of land
sales revenues recognized for each land development project. The cost
percentages used are based on estimates of development costs and sales revenues
to completion of each project and are revised periodically for changes in
estimates or development plans. The specific identification method is used to
determine cost of sales of certain parcels of land.
IV-11
Certain of the land assets of the Ventures are the subject of a Contingent Stock
Agreement (Agreement) between the Company and the former owners of the land or
their successors (the beneficiaries). Under the Agreement, and subject to
various terms and conditions, the Company is required to issue shares of its
common stock (or, in certain circumstances, Increasing Rate Cumulative Preferred
stock) to the beneficiaries based on the appraised values of the assets at
specified "termination dates" from 2000 to 2009 and/or cash flows generated from
the development and/or sale of the assets prior to the termination dates.
The Company has retained full responsibility for its obligations under the
Agreement. These obligations are unsecured and have not been guaranteed by the
Ventures. Accordingly, the Agreement imposes no direct or contingent liabilities
on the Ventures and all related costs or expenses are recognized by the Company.
(e) Leases
Leases which transfer substantially all the risks and benefits of ownership to
tenants are considered finance leases and the present values of the minimum lease
payments and the estimated residual values of the leased properties, if any, are
accounted for as receivables. Leases which transfer substantially all the risks
and benefits of ownership to the Ventures are considered capital leases and the
present values of the minimum lease payments are accounted for as property and
debt.
In general, minimum rent revenues are recognized when due from tenants; however,
estimated collectible minimum rent revenues under leases which provide for
varying rents over their terms are averaged over the terms of the leases.
(f) Income taxes
Deferred income taxes are accounted for using the asset and liability method.
Under this method, deferred income taxes are recognized for temporary differences
between the financial reporting bases of assets and liabilities and their
respective tax bases and for operating loss and tax credit carryforwards based on
enacted tax rates expected to be in effect when such amounts are realized or
settled. However, deferred tax assets are recognized only to the extent that it
is more likely than not that they will be realized based on consideration of
available evidence, including tax planning strategies and other factors.
(g) Cash and cash equivalents
Short-term investments with maturities at dates of purchase of three months or
less are classified as cash equivalents.
(h) Information about financial instruments
Fair values of financial instruments approximate their carrying values in the
financial statements except for debt for which fair value information is provided
in note 5.
(2) Property Operating properties and deferred costs of projects at December 31, 1998 are
summarized as follows (in thousands):
Buildings and improvements................................................. $289,902
Land....................................................................... 26,023
Deferred costs............................................................. 10,472
Furniture and equipment.................................................... 463
Total................................................................... --------
$326,860
========
Depreciation expense for 1998 was $9,668,000 and amortization expense was
$917,000.
IV-12
Investment land and land held for development and sale at December 31, 1998 is
summarized as follows (in thousands):
Land under development..................................................... $131,663
Finished land.............................................................. 70,747
Raw land................................................................... 75,745
Total................................................................... --------
$278,155
========
(3) Accounts and notes Accounts and notes receivable at December 31, 1998 are summarized as follows (in
receivable thousands):
Accounts receivable, primarily accrued rents and
income under tenant leases............................................... $ 11,547
Notes receivable from sales of operating properties........................ 1,221
Notes receivable from sales of land........................................ 62,802
Interest bearing advances to the Company................................... 99,018
Noninterest bearing advances to the Company................................ 13,292
--------
187,880
Less allowance for doubtful receivables.................................... 834
--------
Total................................................................... $187,046
========
Accounts and notes receivable due after one year were $27,561,000 at December 31,
1998.
Credit risk with respect to receivables from tenants is not highly concentrated
due to the large number of tenants. The Ventures perform credit evaluations of
prospective new tenants and require security deposits in certain circumstances.
Tenants' compliance with the terms of their leases is monitored closely, and the
allowance for doubtful receivables is established based on analyses of the risk
of loss on specific tenant accounts, historical trends and other relevant
information. Notes receivable from sales of land are primarily due from builders
at the community development project in Summerlin. The Ventures perform credit
evaluations of the builders and generally require substantial down payments (at
least 20%) on all land sales that they finance. These notes and notes from sales
of operating properties are generally secured by first liens on the related
properties.
Advances to the Company are unsecured and without a stated due date. Interest is
charged (with limited exceptions) at the same rate that is charged on the Ventures'
credit facilities borrowings described in note 5. Interest on these advances was
$9,067,000 in 1998.
(4) Pension and postre- Substantially all of the employees of the Ventures are eligible to participate in
tirement plans a defined benefit pension plan (the "funded plan") sponsored by the Company. In
addition, employees whose defined benefits exceed the limits of the funded plan
are eligible to participate in separate, nonqualified unfunded plans sponsored by
the Company. Benefits under the pension plans are based on the participants'
years of service and compensation. The Ventures reimburse the Company for their
share of the annual benefit cost under the plan. The Ventures' pension cost was
$2,485,000 in 1998.
Full-time employees of the Ventures who meet minimum age and service requirements
are eligible to receive postretirement medical and life insurance benefits under
a plan sponsored by the Company. The Ventures reimburse the Company for their
share of the annual benefit costs under the plan, which include a portion of the
cost of participants' life insurance coverage and contributions (based on years
of service) to the cost of participants' medical insurance coverage, subject to a
maximum annual contribution. The Ventures' postretirement benefit cost was
$606,000 in 1998.
IV-13
(5) Debt Debt at December 31, 1998 is summarized as follows (in thousands):
Borrowings from the Company:
Deed of trust notes payable.............................................. $362,167
Credit lines............................................................. 61,855
Other loans.............................................................. 64,341
--------
488,363
Mortgages payable - other lenders.......................................... 317,176
Other debt................................................................. 15,769
--------
Total................................................................... $821,308
========
The deed of trust notes payable to the Company are secured by certain land and
operating properties and general assignments of rents. These notes are due
December 31, 2012, and minimum principal payments, based on a thirty-year amortization
schedule, are due quarterly. Specified principal payments are also required when
land is released from the deed of trust; however, payments made due to partial
releases reduce or offset the required quarterly payments. Notes aggregating 348,112,000
bear interest at 12.25% through December 2000, and at the greater of the prime
rate plus 3.75% or 10% thereafter to maturity or repayment. The remaining notes
bear interest at 12.25% throughout their terms. Interest on the notes was
$45,671,000 in 1998.
The Ventures have five separate credit line facilities with the Company that
provide for aggregate borrowings of up to $115,000,000. These facilities may be
used for various purposes, including acquisitions, development and other corporate
needs, subject to specified terms and conditions. The credit facilities are
available to December 31, 2012. Borrowings are secured by deeds of trust on
certain land assets. Borrowings under the credit facilities bear interest at 9%
through December 2001, and at the greater of the prime rate plus 3.75% or 10%
thereafter. Interest on the credit line facilities was $5,055,000 in 1998.
Other loans payable to the Company are unsecured and are due in equal annual
installments over periods to 2023. The notes bear interest at a variable rate (9%
at December 31, 1998) which is based on the weighted-average interest rate of
certain borrowings of the Company and subsidiaries. Interest on the other loans
was $6,476,000 in 1998.
The mortgages payable to other lenders are secured by deeds of trust or mortgages
on properties and general assignments of rents. This debt matures at various
dates through 2017 and, at December 31, 1998, bears interest at a weighted-average
effective rate of 7.70%. At December 31, 1998, approximately $220,952,000 of the
mortgages were payable to one lender.
Other debt includes special improvement district bonds and construction loans.
Other debt bears interest at a weighted-average effective rate of 7.26% at
December 31, 1998.
The annual maturities of debt at December 31, 1998 are summarized as follows (in
thousands):
Borrowings
from the Other
Company Borrowings Total
------------- ------------ ------------
1999........................................ $ 7,424 $ 5,510 $ 12,934
2000........................................ 3,828 4,281 8,109
2001........................................ 4,024 5,944 9,968
2002........................................ 4,247 7,249 11,496
2003........................................ 4,499 6,126 10,625
Subsequent to 2003.......................... 464,341 303,835 768,176
-------- -------- ------------
Total.................................... $488,363 $332,945 $821,308
======== ======== ============
Total interest costs were $83,411,000 in 1998, of which $15,265,000, were
capitalized.
IV-14
During 1998, the Ventures incurred extraordinary losses related to extinguishments
of debt prior to scheduled maturity of $1,863,000, less related deferred income
tax benefits of $736,000. The sources of funds used to pay the debt and fund the
prepayment penalties, where applicable, were refinancings of the related
properties.
The carrying amounts of the borrowings from the Company approximate fair value at
December 31, 1998. The carrying amounts and estimated fair values of the
Ventures' other debt at December 31, 1998 are summarized as follows (in thousands):
Carrying Estimated
Amount Fair Value
------------ ----------
Fixed rate debt.................................................. $326,060 $342,962
Variable rate debt............................................... 6,885 6,885
------------ ----------
$332,945 $349,847
============ ==========
Fair value estimates are made at a specific point in time, are subjective in
nature and involve uncertainties and matters of significant judgment. Settlement
of the Ventures' debt obligations at fair value may not be possible and may not be
a prudent management decision.
(6) Income taxes Income tax expense is reconciled to the amount computed by applying the Federal
corporate tax rate as follows for the year ended December 31, 1998 (in thousands):
Tax at statutory rate on earnings before
income taxes and extraordinary losses............................. $ 20,509
State income taxes, net of Federal income
tax benefit....................................................... 1,551
--------
Income tax expense........................................... $ 22,060
========
The net deferred tax asset at December 31, 1998 is summarized as follows (in
thousands):
Total deferred tax assets........................................... $ 75,027
Total deferred tax liabilities...................................... 21,367
--------
Net deferred tax asset............................................ $ 53,660
========
The tax effects of temporary differences and loss carryforwards included in the net
deferred tax asset at December 31, 1998 are summarized as follows (in thousands):
Property, primarily differences in depreciation and
amortization, the tax basis of land assets and
treatment of interest and certain other costs.................... $ 41,740
Operating loss and tax credit carryforwards......................... 11,295
Other............................................................... 625
--------
Total............................................................ $ 53,660
========
The net operating losses carried forward from December 31, 1998 for Federal income
tax purposes aggregate approximately $27,645,000. The loss carryforward will
begin to expire in 2005.
As indicated above, the deferred tax assets relate primarily to differences in the
book and tax bases of property (particularly land assets) and to operating loss
carryforwards for Federal income tax purposes. Based on projections of future
taxable income, management believes that it is more likely than not that the net
deferred tax asset will be realized. The amount of the net
IV-15
deferred tax asset considered realizable could be reduced in the near term, however,
if estimates of future taxable income are reduced.
(7) Gain on Gain on dispositions of assets, net, is summarized as follows for the year ended
dispositions December 31, 1998 (in thousands):
of assets, net
Net gain on operating properties.................................... $15,879
Other, net.......................................................... (23)
-------
Total............................................................ $15,856
========
The net gain on operating properties relates primarily to sales of a hotel
property and two office/industrial buildings.
(8) Series A Preferred Howard Hughes Properties, Inc. (HHPI) has issued 25,000 shares of Series A
Stock Preferred stock to the Company. The shares have a liquidation preference of
$2,000 per share and earn dividends at an annual rate of 9.9% of the liquidation
preference. Dividends are cumulative, however, no dividends were paid during 1998
because HHPI incurred a tax loss. Dividends in arrears at December 31, 1998
aggregated $4,450,000. At the option of the Company, the shares are redeemable at
any time to December 31, 2017 at a price of $2,000 per share.
(9) Leases The Ventures, as lessee, have entered into operating leases expiring at various
dates through 2076. Rents under such leases aggregated $448,600 in 1998. In
addition, real estate taxes, insurance and maintenance expenses are obligations of
the Ventures. Minimum rent payments due under operating leases in effect at
December 31, 1998 are summarized as follows (in thousands):
1999................................................................ $ 449
2000................................................................ 449
2001................................................................ 449
2002................................................................ 449
2003................................................................ 278
Subsequent to 2003.................................................. 16,326
--------
Total............................................................ $ 18,400
========
Space in the Ventures' operating properties is leased to approximately 700
tenants. In addition to minimum rents, the majority of the retail center leases
provide for percentage rents when the tenants' sales volumes exceed stated
amounts, and the majority of the retail center and office leases provide for other
rents which reimburse the Ventures for certain of their operating expenses. Rents
from tenants are summarized as follows (in thousands):
Minimum rents....................................................... $ 47,977
Percentage rents.................................................... 996
Other rents......................................................... 24,838
------------
Total............................................................ $ 73,811
============
IV-16
The minimum rents to be received from tenants under operating leases in effect at
December 31, 1998 are summarized as follows (in thousands):
1999........................................................... $ 44,419
2000........................................................... 39,630
2001........................................................... 34,477
2002........................................................... 26,663
2003........................................................... 20,235
Subsequent to 2003............................................. 63,877
--------
Total....................................................... $229,301
========
(10) Other transactions with Under an informal agreement, the Company provides various services to the Ventures, including
The Rouse Company accounting, data processing, legal, leasing, finance, and other administrative and support
functions. The Ventures reimburse the Company for the cost of these services, determined in
accordance with the Company's established cost accounting practices. Under terms of a
license agreement, the Ventures paid the Company a fee of $1,000,000 in 1998 in consideration
for the right to use the Company's name in their property management operations. The fee
under the license agreement is determined annually based on various operating factors.
Operating expenses for 1998 include license fees and service cost reimbursements to the
Company of approximately $8,305,000. The Ventures also reimburse the Company for costs of
any services it provides with respect to development of operating properties. These costs
were approximately $2,198,000 in 1998 and related primarily to development of an expansion of
a regional shopping center and new office buildings in Columbia and Summerlin.
(11) Other commitments Commitments for the construction and development of properties in the ordinary course of
and contingencies business and other commitments not set forth elsewhere amount to approximately $60,000,000 at
December 31, 1998.
Certain of the Ventures have guaranteed payment of the Company's obligations under its credit
facilities with a group of lenders, subject to various terms and conditions. At December 31,
1998, outstanding borrowings under the facilities were $602,000,000.
The Ventures are defendants in various litigation matters arising in the ordinary course of
business, some of which involve claims for damages that are substantial in amount. Some of
these litigation matters are covered by insurance. In the opinion of management, adequate
provision has been made for losses with respect to litigation matters, where appropriate, and
the ultimate resolution of such litigation matters is not likely to have a material effect on
the combined financial position of the Ventures. Due to the Ventures' fluctuating net
earnings (loss), it is not possible to predict whether the resolution of these matters is
likely to have a material effect on the Ventures' combined net earnings (loss) and it is,
therefore, possible that the resolution of these matters could have such an effect in a
future period.
(12) Year 2000 issue The year 2000 issue relates to whether computer systems will properly recognize
date-sensitive information to allow accurate processing of transactions and data relating to
the year 2000 and beyond. In addition, the year 2000 issue relates to whether
non-Information Technology (IT) systems that depend on embedded computer technology will
recognize the year 2000. Systems that do not properly recognize such information could
generate erroneous information or fail.
As described above, the Company provides the Ventures with various services. The Venture is
dependent on the Company's IT systems being year 2000 compliant. The Company has adopted a
plan to replace virtually all of its management information systems and accounting systems.
In accordance with this plan, all mission critical IT systems have been or are being replaced
with systems that are year 2000 compliant. For non-IT systems, the Company has completed a
comprehensive review of computer hardware and software in mechanical systems and has
developed a program to repair or replace and test non-IT systems that are not year 2000
compliant by the third quarter of 1999. In addition, the Company is developing contingency
plans in the event that any critical non-IT system fails as a result of a year 2000 issue.
Costs to
IV-17
specifically remediate non-IT systems (e.g., escalators, elevators, security, heating, ventilating
and cooling systems, etc.) are not expected to be material. Management of the Company and the
Ventures do not believe that the year 2000 issue will pose significant problems in IT and non-IT
systems, or that resolution of any potential problems with respect to these systems will have a
material effect on the Ventures' financial condition or results of operations.
The Company and management of the Ventures believe that the Ventures' exposure to the year
2000 issue is widespread with no known major direct exposure. The Company and management of
the Ventures believe that their most likely worst-case exposure is at the indirect level,
involving vendors, suppliers and tenants. While it is not possible at this time to determine
the likely impact of these potential problems, the Company and management of the Ventures
will continue to evaluate these areas and develop contingency plans, as appropriate.
(13) New accounting In March 1998, the American Institute of Certified Public Accountants issued Statement of
standards not yet Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
adopted Internal Use" (SOP 98-1) which is required to be adopted by the Ventures no later than
January 1, 1999. SOP 98-1 provides guidance as to whether costs incurred relating to
internal-use software should be expensed or capitalized. The guidance in SOP 98-1 is
required to be applied to costs incurred subsequent to adoption and may not be applied to
costs incurred prior to initial application. The Ventures intend to adopt SOP 98-1 effective
January 1, 1999, and do not believe that adoption will have a material effect on their results
of operations.
In April 1998, the American Institute of Certified Public Accountants issued Statement of
Position 98-5, "Reporting on the Costs of Start-up Activities" (SOP 98-5) which is required
to be adopted by the Ventures no later than January 1, 1999. SOP 98-5 requires that start-up
costs and organization costs, not otherwise addressed in existing authoritative literature,
be expensed as incurred. The Ventures intend to adopt SOP 98-5 effective January 1, 1999,
and the initial application will be reported as the cumulative effect of a change in
accounting principle. The Ventures do not believe that adoption will have a material effect
on their results of operations in future periods.
IV-18
Schedule II
-----------
THE ROUSE COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1998, 1997 and 1996
(in thousands)
Additions
-------------------------
Balance at Charged to Charged to Balance at
beginning Costs and other end of
Descriptions of year expenses accounts Deductions year
------------ ---------- ---------- ---------- ---------- ----------
Year ended December 31, 1998:
Allowance for doubtful receivables $ 21,311 $ 7,735 $ --- $ 9,218 /(1)/ $ 19,828
========= ========= ========= ========= =========
Valuation allowance - properties held for sale $ 37,952 $ --- $ --- $ 37,952 /(2)/ $ ---
========= ========= ========= ========= =========
Preconstruction reserve $ 17,351 $ 1,700 $ --- $ 3,143 /(3)/ $ 15,908
========= ========= ========= ========= =========
Year ended December 31, 1997:
Allowance for doubtful receivables $ 28,153 $ 5,766 $ --- $ 12,608 /(1)/ $ 21,311
========= ========= ========= ========= =========
Valuation allowance - properties held for sale $ 35,671 $ 26,249 $ --- $ 23,968 /(2)/ $ 37,952
========= ========= ========= ========= =========
Preconstruction reserve $ 16,317 $ 2,800 $ --- $ 1,766 /(3)/ $ 17,351
========= ========= ========= ========= =========
Year ended December 31, 1996:
Allowance for doubtful receivables $ 24,468 $ 3,688 $ 1,161 $ 1,164 /(1)/ $ 28,153
========= ========= ========= ========= =========
Valuation allowance - properties held for sale $ 15,589 $ 25,825 $ --- $ 5,743 /(2)/ $ 35,671
========= ========= ========= ========= =========
Preconstruction reserve $ 15,379 $ 2,700 $ --- $ 1,762 /(3)/ $ 16,317
========= ========= ========= ========= =========
Notes:
(1) Balances written off as uncollectible.
(2) Allowance related to properties sold.
(3) Costs of unsuccessful projects written off.
IV-19
Schedule III
------------
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized subsequent
Initial cost to Company to acquisition
--------------------------- ----------------------------
Buildings
and
Encum- Improve Improve Carrying
Description brances Land ments(Note 3) ments costs (note 2)
----------- --------- ---------- ------------- --------- ---------------
Operating Properties:
Park Meadows $175,337 $35,812 $265,031 $ 55 $ --
Retail Center
Denver, CO
Bridgewater Commons 150,000 24,715 242,660 -- --
Retail Center
Bridgewater, NJ
Towson Town Center 140,000 45,391 207,723 255 --
Retail Center
Towson, MD
Arizona Center 107,550 4,137 -- 151,391 --
Mixed-Use project
Phoenix, AZ
The Fashion Show 75,232 33,179 120,347 1,212 --
Retail Center
Las Vegas, NV
South Street Seaport 58,337 -- -- 146,274 --
Retail Center
New York, NY
Woodbridge Center 132,504 26,301 -- 119,126 --
Retail Center
Woodbridge, NJ
Beachwood Place 119,568 10,673 -- 129,893 --
Retail Center
Beachwood, OH
Fashion Place Mall 76,649 19,379 119,715 -- --
Retail Center
Salt Lake City, UT.
Owings Mills 61,000 17,006 -- 113,557 --
Retail Center
Baltimore County, MD
Gross amount at which carried
at close of period
Life on
Buildings Accumulated Date of which depre-
and depreciation completion ciation in
latest
Improve and of Date income state-
Description Land ments Total amortization construction acquired ment is computed
----------- -------- --------- --------- ------------ ------------ -------- ----------------
Operating Properties:
Park Meadows $35,812 $265,086 $300,898 $ 1,890 06/96 07/98 Note 9
Retail Center
Denver, CO
Bridgewater Commons 24,715 242,660 267,375 1,981 06/88 12/98 Note 9
Retail Center
Bridgewater, NJ
Towson Town Center 45,391 207,978 253,369 856 06/59 10/98 Note 9
Retail Center
Towson, MD
Arizona Center 4,137 151,391 155,528 31,081 07/83 N/A Note 9
Mixed-Use project
Phoenix, AZ
33,179 121,559 154,738 6,870 03/81 06/96 Note 9
The Fashion Show
Retail Center
Las Vegas, NV
South Street Seaport -- 146,274 146,274 29,924 07/83 N/A Note 9
Retail Center
New York, NY
Woodbridge Center 26,301 119,126 145,427 27,680 03/71 N/A Note 9
Retail Center
Woodbridge, NJ
10,673 129,893 140,566 11,562 08/78 N/A Note 9
Beachwood Place
Retail Center
Beachwood, OH
19,379 119,715 139,094 490 03/72 10/98 Note 9
Fashion Place Mall
Retail Center
Salt Lake City, UT.
Owings Mills 17,006 113,557 130,563 13,691 07/86 N/A Note 9
Retail Center
Baltimore County, MD
IV-20
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized subsequent
Initial cost to Company to acquisition
--------------------------- -----------------------------
Buildings
and
Encum- Improve Improve Carrying
Description brances Land ments(Note 3) ments costs
----------- --------- --------- ------------- ------------- -----------
Pioneer Place $102,475 $ -- $ -- $122,687 $ --
Mixed-Use project
Portland, OR
Oviedo Marketplace 69,485 11,676 -- 108,374 --
Retail Center
Orlando, FL.
Westlake Center 93,175 10,582 -- 104,807 --
Mixed-Use project
Seattle, WA
The Gallery at Harborplace 106,562 6,648 -- 106,820 --
Mixed-Use project
Baltimore, MD
Mall St. Matthews 71,223 -- -- 102,124 --
Retail Center
Louisville, KY
Bayside Marketplace 76,838 -- -- 97,408 --
Retail Center
Miami, FL
Governor's Square 54,077 -- -- 85,379 --
Retail Center
Tallahassee, FL
Paramus Park 70,353 13,475 -- 82,935 --
Retail Center
Paramus, NJ
Moorestown Mall 42,000 13,577 65,596 -- --
Retail Center
Burlington County, NJ
Faneuil Hall Marketplace 53,362 -- -- 74,858 --
Retail Center
Boston, MA
Santa Monica Place -- 5,088 -- 69,762 --
Retail Center
Santa Monica, CA
Gross amount at which carried
at close of period
---------------------------------- Life on
Buildings Accumulated Date of which depre-
and depreciation completion ciation in latest
Improve and of Date income state-
Description Land ments Total amortization construction acquired ment is computed
----------- ------- --------- ----- ------------ ------------ -------- ----------------
Pioneer Place $ -- $122,687 $ 122,687 $ 26,253 03/90 N/A Note 9
Mixed-Use project
Portland, OR
Oviedo Marketplace 11,676 108,374 120,050 2,183 03/98 N/A Note 9
Retail Center
Orlando, FL.
Westlake Center 10,582 104,807 115,389 28,911 10/88 N/A Note 9
Mixed-Use project
Seattle, WA
The Gallery at Harborplace 6,648 106,820 113,468 26,622 09/87 N/A Note 9
Mixed-Use project
Baltimore, MD
Mall St. Matthews -- 102,124 102,124 17,853 03/62 N/A Note 9
Retail Center
Louisville, KY
Bayside Marketplace -- 97,408 97,408 17,925 04/87 N/A Note 9
Retail Center
Miami, FL
Governor's Square -- 85,379 85,379 7,509 08/79 N/A Note 9
Retail Center
Tallahassee, FL
Paramus Park 13,475 82,935 96,410 10,714 03/74 N/A Note 9
Retail Center
Paramus, NJ
Moorestown Mall 13,577 65,596 79,173 2,189 03/63 12/97 Note 9
Retail Center
Burlington County, NJ
Faneuil Hall Marketplace -- 74,858 74,858 13,105 08/76 N/A Note 9
Retail Center
Boston, MA
Santa Monica Place 5,088 69,762 74,850 11,787 10/80 N/A Note 9
Retail Center
Santa Monica, CA
IV-21
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized subsequent
Initial cost to Company to acquisition
--------------------------- -----------------------------
Buildings
and
Encum- Improve Improve Carrying
Description brances Land ments(Note 3) ments costs
----------- -------- ---------- ------------- ------------ ------------
Cherry Hill Mall $78,280 $14,767 $ -- $58,210 $ --
Retail Center
Cherry Hill, NJ
Riverwalk 10,833 -- -- 72,495 --
Retail Center
New Orleans, LA
Oakwood Center 53,615 14,750 -- 57,395 --
Retail Center
Gretna, LA
Augusta Mall 61,347 5,398 -- 66,130 --
Retail Center
Augusta, GA
Hulen Mall 64,102 5,064 -- 65,624 --
Retail Center
Ft. Worth, TX
Plymouth Meeting 34,785 702 -- 69,386 --
Retail Center
Montgomery County, PA
Echelon Mall 59,334 6,160 -- 63,317 --
Retail Center
Voorhees, NJ
Harborplace 36,611 -- -- 58,147 --
Retail Center
Baltimore, MD
Perimeter Mall -- -- -- 50,051 --
Retail Center
Atlanta, GA
Blue Cross & Blue Shield 31,400 1,000 -- 44,756 --
Building I
Office Building
Baltimore, MD
Gross amount at which carried
at close of period
Life on
Buildings Accumulated Date of which depre-
and depreciation completion ciation in latest
Improve and of Date income state-
Description Land ments Total amortization construction acquired ment is computed
----------- -------- --------- ----- ------------ ------------ -------- ----------------
Cherry Hill Mall $14,767 $58,210 $ 72,977 $ 18,187 10/61 N/A Note 9
Retail Center
Cherry Hill, NJ
Riverwalk -- 72,495 72,495 11,648 08/86 N/A Note 9
Retail Center
New Orleans, LA
Oakwood Center 14,750 57,395 72,145 9,887 10/82 N/A Note 9
Retail Center
Gretna, LA
Augusta Mall 5,398 66,130 71,528 5,879 08/78 N/A Note 9
Retail Center
Augusta, GA
Hulen Mall 5,064 65,624 70,688 12,055 08/77 N/A Note 9
Retail Center
Ft. Worth, TX
Plymouth Meeting 702 69,386 70,088 13,474 02/66 N/A Note 9
Retail Center
Montgomery County, PA
Echelon Mall 6,160 63,317 69,477 12,888 09/70 N/A Note 9
Retail Center
Voorhees, NJ
Harborplace -- 58,147 58,147 12,456 07/80 N/A Note 9
Retail Center
Baltimore, MD
Perimeter Mall -- 50,051 50,051 7,597 08/71 N/A Note 9
Retail Center
Atlanta, GA
Blue Cross & Blue Shield 1,000 44,756 45,756 10,142 07/89 N/A Note 9
Building I
Office Building
Baltimore, MD
IV-22
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized subsequent
Initial cost to Company to acquisition
--------------------------- ----------------------------
Buildings
and
Encum- Improve Improve Carrying
Description brances Land ments(Note 3) ments costs
----------- -------- ---------- ------------- ------------ ------------
3800 Howard Hughes Parkway $39,222 $3,622 $38,438 $ 1,806 $ --
Office Building
Las Vegas, NV
White Marsh 41,147 4,390 -- 33,549 --
Retail Center
Baltimore, MD
Exton Square 14,762 1,408 -- 34,220 --
Retail Center
Exton, PA
The Jacksonville Landing 12,911 -- -- 33,609 --
Retail Center
Jacksonville, FL
Tampa Bay Center 35,714 920 -- 31,391 --
Retail Center
Tampa, FL
Village of Cross Keys -- 925 -- 31,319 --
Mixed-Use project
Baltimore, MD
North Star -- 168 -- 30,629 --
Retail Center
San Antonio, TX
Willowbrook 38,435 853 -- 29,302 --
Retail Center
Wayne, NJ
3773 Howard Hughes Parkway 22,406 1,738 22,625 3,338 --
Office Building
Las Vegas, NV
Two Owings Mills 18,174 1,000 -- 25,865 --
Corporate Center
Office Building
Baltimore, MD
Gross amount at which carried
at close of period
----------------------------------
Life on
Buildings Accumulated Date of which depre-
and depreciation completion ciation in latest
Improve and of Date income state-
Description Land ments Total amortization construction acquired ment is computed
----------- ------- --------- ----- ------------ ------------ -------- ----------------
3800 Howard Hughes Parkway $3,622 $40,244 $ 43,866 $ 3,795 11/86 06/96 Note 9
Office Building
Las Vegas, NV
White Marsh 4,390 33,549 37,939 9,062 08/81 N/A Note 9
Retail Center
Baltimore, MD
Exton Square 1,408 34,220 35,628 9,850 03/73 N/A Note 9
Retail Center
Exton, PA
The Jacksonville Landing -- 33,609 33,609 11,663 06/87 N/A Note 9
Retail Center
Jacksonville, FL
Tampa Bay Center 920 31,391 32,311 10,534 08/79 N/A Note 9
Retail Center
Tampa, FL
Village of Cross Keys 925 31,319 32,244 10,786 09/65 N/A Note 9
Mixed-Use project
Baltimore, MD
North Star 168 30,629 30,797 8,740 09/60 N/A Note 9
Retail Center
San Antonio, TX
Willowbrook 853 29,302 30,155 7,301 09/69 N/A Note 9
Retail Center
Wayne, NJ
3773 Howard Hughes Parkway 1,738 25,963 27,701 1,669 11/95 6/96 Note 9
Office Building
Las Vegas, NV
Two Owings Mills 1,000 25,865 26,865 6,466 09/87 N/A Note 9
Corporate Center
Office Building
Baltimore, MD
IV-23
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized subsequent
Initial cost to Company to acquisition
--------------------------- ------------------------------
Buildings
and
Encum- Improve Improve Carrying
Description brances Land ments(Note 3) ments costs
----------- ------- --------- ------------- ------------ ------------
The Gallery at Market East $ -- $ -- $ -- $24,166 $ --
Retail Center
Philadelphia, PA
Senate Plaza 16,067 3,488 20,379 -- --
Office Building
Camp Hill, PA.
3960 Howard Hughes Parkway -- 800 -- 22,364 --
Office Building
Las Vegas, NV
Franklin Park 25,498 653 -- 21,097 --
Retail Center
Toledo, OH
Hunt Valley 75 17,265 6,659 14,187 410 --
Office Building
Hunt Valley, MD.
The Grand Avenue -- -- -- 21,218 --
Retail Center
Milwaukee, WI
Mondawmin Mall 4,151 2,251 -- 18,327 --
Retail Center
Baltimore, MD
Highland Mall 5,426 13 -- 18,238 --
Retail Center
Austin, TX
One Owings Mills 11,385 650 -- 17,045 --
Corporate Center
Office Building
Baltimore, MD
Blue Cross & Blue Shield 11,453 1,000 -- 16,591 --
Building II
Office Building
Baltimore, MD
Gross amount at which carried
at close of period
-----------------------------------
Life on
Buildings Accumulated Date of which depre-
and depreciation completion ciation in latest
Improve and of Date income state-
Description Land ments Total amortization construction acquired ment is computed
----------- ------ --------- ----- ------------ ------------ -------- ----------------
The Gallery at Market East $ -- $24,166 $ 24,166 $ 7,393 08/77 N/A Note 9
Retail Center
Philadelphia, PA
Senate Plaza 3,488 20,379 23,867 42 07/72 12/98 Note 9
Office Building
Camp Hill, PA.
3960 Howard Hughes Parkway 800 22,364 23,164 354 4/98 6/96 Note 9
Office Building
Las Vegas, NV
Franklin Park 653 21,097 21,750 5,306 07/71 N/A Note 9
Retail Center
Toledo, OH
Hunt Valley 75 6,659 14,597 21,256 54 07/84 12/98 Note 9
Office Building
Hunt Valley, MD.
The Grand Avenue -- 21,218 21,218 10,824 08/82 N/A Note 9
Retail Center
Milwaukee, WI
Mondawmin Mall 2,251 18,327 20,578 7,425 01/78 N/A Note 9
Retail Center
Baltimore, MD
Highland Mall 13 18,238 18,251 6,236 08/71 N/A Note 9
Retail Center
Austin, TX
One Owings Mills 650 17,045 17,695 6,232 11/88 N/A Note 9
Corporate Center
Office Building
Baltimore, MD
Blue Cross & Blue Shield 1,000 16,591 17,591 3,379 08/90 N/A Note 9
Building II
Office Building
Baltimore, MD
IV-24
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized subsequent Gross amount at which carried
Initial cost to Company to acquisition at close of period
----------------------- ---------------------------- -----------------------------
Buildings Buildings
and and
Encum- Improve Improve Carrying Improve
Description brances Land ments(Note 3) ments costs Land ments Total
----------- ------- ---- ------------- ----- ----- ---- ----- -----
3753 / 3763 Howard Hughes
Parkway $10,985 $3,844 $12,018 $ 687 $ -- $3,844 $12,705 $ 16,549
Office Building
Las Vegas, NV
Centerpointe 7,006 4,012 11,302 -- -- 4,012 11,302 15,314
Office Building
Hunt Valley, MD
Canyon Center 12,597 2,081 7,161 5,391 -- 2,081 12,552 14,633
Office Building
Las Vegas, NV
Midtown Square -- -- -- 14,620 -- -- 14,620 14,620
Retail Center
Charlotte, NC
3930 Howard Hughes Parkway 6,750 3,108 11,279 27 -- 3,108 11,306 14,414
Office Building
Las Vegas, NV
Shilling Plaza South 6,206 5,437 7,402 14 -- 5,437 7,416 12,853
Office Building
Hunt Valley, MD
3980 Howard Hughes 10,586 879 5,583 6,113 -- 879 11,696 12,575
Office Building
Las Vegas, NV
Crossing Business 8,509 2,842 1,416 8,287 -- 2,842 9,703 12,545
Center Phase III
Office Building
Las Vegas, NV
Shilling Plaza North 7,932 4,024 8,059 -- -- 4,024 8,059 12,083
Office Building
Hunt Valley, MD
Canyon Center -- 1,723 -- 10,129 -- 1,723 10,129 11,852
Office Building
Las Vegas, NV
Life on
Accumulated Date of which depre-
depreciation completion ciation in latest
and of Date income state-
Description amortization construction acquired ment is computed
----------- ------------ ------------ -------- ----------------
3753 / 3763 Howard Hughes
Parkway $ 1,003 10/91 6/96 Note 9
Office Building
Las Vegas, NV
Centerpointe 24 07/87 12/98 Note 9
Office Building
Hunt Valley, MD
Canyon Center 638 03/98 06/96 Note 9
Office Building
Las Vegas, NV
Midtown Square 10,396 10/59 N/A Note 9
Retail Center
Charlotte, NC
3930 Howard Hughes Parkway 1,196 12/94 06/96 Note 9
Office Building
Las Vegas, NV
Shilling Plaza South 15 07/87 12/98 Note 9
Office Building
Hunt Valley, MD
3980 Howard Hughes 526 04/97 06/96 Note 9
Office Building
Las Vegas, NV
Crossing Business 798 09/96 06/96 Note 9
Center Phase III
Office Building
Las Vegas, NV
Shilling Plaza North 17 02/80 12/98 Note 9
Office Building
Hunt Valley, MD
Canyon Center 133 06/98 06/96 Note 9
Office Building
Las Vegas, NV
IV-25
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized subsequent Gross amount at which carried
Initial cost to Company to acquisition at close of period
----------------------- ---------------------------- -----------------------------
Buildings Buildings
and and
Encum- Improve Improve Carrying Improve
Description brances Land ments(Note 3) ments costs Land ments Total
----------- ------- ---- ------------- ------- -------- ----- ------- -----
Riverspark 2/Building 2 $ 1,504 $ 3,358 $ 7,955 $ -- $ -- $ 3,358 $ 7,955 $ 11,313
Office Building/Industrial
Columbia, MD
Trails Village Center 9,948 3,082 -- 6,804 -- 3,082 6,804 9,886
Community Retail Center
Las Vegas, NV
Crossing Business 7,679 1,326 7,951 507 -- 1,326 8,458 9,784
Center Phase I
Office Building
Las Vegas, NV
Inglewood Office II 6,279 2,261 7,304 -- -- 2,261 7,304 9,565
Office Building
Landover, MD
3770 Howard Hughes Parkway 5,530 691 8,010 484 -- 691 8,494 9,185
Office Building
Las Vegas, NV
201 International Circle 4,097 5,168 3,763 172 -- 5,168 3,935 9,103
Office Building
Hunt Valley, MD
Metro Plaza 423 202 -- 8,240 -- 202 8,240 8,442
Retail Center
Baltimore, MD
Equinox @ CBC 7,052 1,257 398 6,631 -- 1,257 7,029 8,286
Office Building
Las Vegas, NV
Montgomery Ward 7,679 607 7,213 37 -- 607 7,250 7,857
Office Building / Industrial
Las Vegas, NV
Inglewood Office Center I 5,145 1,940 5,867 -- -- 1,940 5,867 7,807
Office Building
Landover, MD
Life on
Accumulated Date of which depre-
depreciation completion ciation in latest
and of Date income state-
Description amortization construction acquired ment is computed
----------- ------------ ------------ -------- ----------------
Riverspark 2/Building 2 $ 17 07/87 12/98 Note 9
Office Building/Industrial
Columbia, MD
Trails Village Center 108 05/98 06/96 Note 9
Community Retail Center
Las Vegas, NV
Crossing Business 591 12/94 06/96 Note 9
Center Phase I
Office Building
Las Vegas, NV
Inglewood Office II 15 07/26 12/98 Note 9
Office Building
Landover, MD
3770 Howard Hughes Parkway 901 10/90 06/96 Note 9
Office Building
Las Vegas, NV
201 International Circle 20 07/82 12/98 Note 9
Office Building
Hunt Valley, MD
Metro Plaza 3,696 N/A 12/82 Note 9
Retail Center
Baltimore, MD
Equinox @ CBC 233 12/97 06/96 Note 9
Office Building
Las Vegas, NV
Montgomery Ward 519 10/95 06/96 Note 9
Office Building / Industrial
Las Vegas, NV
Inglewood Office Center I 12 07/82 12/98 Note 9
Office Building
Landover, MD
IV-26
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized Gross amount at which carried
Initial cost to Company subsequent to acquisition at close of period
----------------------- -------------------------- -------------------------
Buildings Buildings
and and
Encum- Improve Improve Carrying Improve
Description brances Land ments(Note 3) ments costs Land ments Total
----------- ------- --------- ------------- ------------ ------------ ------ --------- -----
Crossing Business $5,583 $ 357 $7,097 $ -- $ -- $ 357 $7,097 $7,454
Center Phase II
Office Building
Las Vegas, NV
840 Grier 6,096 963 1,430 4,854 -- 963 6,284 7,247
Office Building / Industrial
Las Vegas, NV
Ambassador Center 4,377 1,385 5,282 -- -- 1,385 5,282 6,667
Office Building
Woodlawn, MD
Raytheon -- 422 6,133 -- -- 422 6,133 6,555
Office Building / Industrial
Las Vegas, NV
Inglewood Tech V 4,295 2,889 3,654 -- -- 2,889 3,654 6,543
Industrial Building
Landover, MD
First National Bank Plaza 5,117 -- -- 6,330 -- -- 6,330 6,330
Office Building
Mt. Prospect, IL
Plaza East 4,604 911 5,299 -- -- 911 5,299 6,210
Office Building / Industrial
Las Vegas, NV
420 Pilot 4,102 1,066 (140) 5,242 -- 1,066 5,102 6,168
Office Building / Industrial
Las Vegas, NV
USA Group 7,000 1,196 4,880 -- -- 1,196 4,880 6,076
Office Building / Industrial
Las Vegas, NV
Pulaski 11 3,909 1,099 4,708 -- -- 1,099 4,708 5,807
Industrial Building
Baltimore, MD
Life on
Accumulated Date of which depre-
depreciation completion ciation in latest
and of Date income state-
Description amortization construction acquired ment is computed
----------- ----------- ------------ --------- -----------------
Crossing Business $ 456 12/95 06/96 Note 9
Center Phase II
Office Building
Las Vegas, NV
840 Grier 300 03/97 06/96 Note 9
Office Building / Industrial
Las Vegas, NV
Ambassador Center 11 07/85 12/98 Note 9
Office Building
Woodlawn, MD
Raytheon 398 11/92 06/96 Note 9
Office Building / Industrial
Las Vegas, NV
Inglewood Tech V 8 07/86 12/98 Note 9
Industrial Building
Landover, MD
First National Bank Plaza 1,913 07/81 N/A Note 9
Office Building
Mt. Prospect, IL
Plaza East 395 12/93 06/96 Note 9
Office Building / Industrial
Las Vegas, NV
420 Pilot 403 09/96 06/96 Note 9
Office Building / Industrial
Las Vegas, NV
USA Group 8 11/98 06/96 Note 9
Office Building / Industrial
Las Vegas, NV
Pulaski 11 10 07/69 12/98 Note 9
Industrial Building
Baltimore, MD
IV-27
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized Gross amount at which
Initial cost to Company subsequent to acquisition carried at close of period
----------------------- ------------------------- --------------------------
Buildings Buildings
and and
Encum- Improve Improve Carrying Improve
Description brances Land ments(Note 3) ments costs Land ments Total
- ---------------------------- ------- --------- ------------- ------------ ------------ ------ --------- ------
Rutherford 5 $ 2,280 $ 614 $ 5,123 $ -- $ -- $ 614 $ 5,123 $5,737
Industrial Building
Woodlawn, MD
Rutherford 60 3,834 1,250 4,445 -- -- 1,250 4,445 5,695
Industrial Building
Woodlawn, MD
Plaza West 4,395 195 5,360 103 195 5,463 5,658
Office Building / Industrial
Las Vegas, NV
980 Kelley Johnson 3,278 815 4,772 -- -- 815 4,772 5,587
Office Building / Industrial
Las Vegas, NV
Canyon Business Center -- 1,188 -- 4,432 -- 1,188 4,432 5,620
Phase V
Office Building / Industrial
Las Vegas, NV
975 Kelley Johnson 3,458 378 5,211 -- -- 378 5,211 5,589
Office Building / Industrial
Las Vegas, NV
Inglewood Tech IV 1,618 2,222 3,365 -- -- 2,222 3,365 5,587
Industrial Building
Landover, MD
Riverspark Building A 3,620 1,461 4,053 -- -- 1,461 4,053 5,514
Industrial Building
Columbia, MD
Hunt Valley 49 3,589 1,575 3,892 -- -- 1,575 3,892 5,467
Industrial Building
Hunt Valley, MD
3960/3980 Parking Garage -- 576 -- 4,678 -- 576 4,678 5,254
Parking Garage
Las Vegas, NV
Life on
Accumulated Date of which depre-
depreciation completion ciation in latest
and of Date income state-
Description amortization construction acquired ment is computed
- ---------------------------- ------------ ------------ -------- ----------------
Rutherford 5 11 07/72 12/98 Note 9
Industrial Building
Woodlawn, MD
Rutherford 60 9 07/72 12/98 Note 9
Industrial Building
Woodlawn, MD
Plaza West 388 11/95 06/96 Note 9
Office Building / Industrial
Las Vegas, NV
980 Kelley Johnson 358 05/92 06/96 Note 9
Office Building / Industrial
Las Vegas, NV
Canyon Business Center 79 05/98 06/96 Note 9
Phase V
Office Building / Industrial
Las Vegas, NV
975 Kelley Johnson 399 11/90 06/96 Note 9
Office Building / Industrial
Las Vegas, NV
Inglewood Tech IV 7 07/86 12/98 Note 9
Industrial Building
Landover, MD
Riverspark Building A 8 09/85 12/98 Note 9
Industrial Building
Columbia, MD
Hunt Valley 49 8 02/82 12/98 Note 9
Industrial Building
Hunt Valley, MD
3960/3980 Parking Garage 198 05/97 06/97 Note 9
Parking Garage
Las Vegas, NV
IV-28
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized subsequent
Initial cost to Company to acquisition
----------------------------- -----------------------------
Buildings
and
Encum- Improve Improve Carrying
Description brances Land ments(Note 3) ments costs Land
----------- ------- ---- ------------- ----- ----- ----
Hunt Valley 36 $ 3,409 $ 1,239 $ 3,954 $ -- -- $ 1,239
Industrial Building
Hunt Valley, MD
950 Pilot 2,167 769 -- 4,185 -- 769
OfficeBuilding/Industrial
Las Vegas, NV
731 Pilot 4,016 862 -- 3,999 -- 862
OfficeBuilding/Industrial
Las Vegas, NV
711 Pilot 3,192 463 -- 4,362 -- 463
OfficeBuilding/Industrial
Las Vegas, NV
Rutherford 46 3,215 1,079 3,697 -- -- 1,079
Industrial Building
Woodlawn, MD
Other properties and related
investments less than
5% of total 112,229 59,280 76,778 98,998 -- 59,280
----------------------------------------------------------------------------------------
Total Operating Properties 2,905,340 488,114 1,388,375 2,842,238 -- 488,114
----------------------------------------------------------------------------------------
Gross amount at which carried
at close of period
----------------------------
Life on
Buildings Accumulated Date of which depre-
and depreciation completion ciation in
Improve and of Date income state-
Description ments Total amortization construction acquired ment is computed
- ---------------------------- ----- ----- ------------ ------------ -------- ----------------
Hunt Valley 36 $ 3,954 $ 5,193 $ 8 02/76 12/98 Note 9
Industrial Building
Hunt Valley, MD
950 Pilot 4,185 4,954 364 08/90 06/96 Note 9
OfficeBuilding/Industrial
Las Vegas, NV
731 Pilot 3,999 4,861 245 10/95 06/96 Note 9
OfficeBuilding/Industrial
Las Vegas, NV
711 Pilot 4,362 4,825 229 11/95 06/96 Note 9
OfficeBuilding/Industrial
Las Vegas, NV
Rutherford 46 3,697 4,776 8 02/88 12/98 Note 9
Industrial Building
Woodlawn, MD
Other properties and related
investments less than
5% of total 175,776 235,056 18,832
---------------------------------------------
Total Operating Properties 4,230,613 4,718,727 578,309
-----------------------------------------------
IV-29
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized subsequent Gross amount at which carried
Initial cost to Company to acquisition at close of period
-------------------------- ------------------------------ ---------------------------
Buildings
and
Encum- Improve Improve Carrying
Description Brances Land ments(Note 3) ments costs Land
----------- ------- ---- ------------- ----- ----- -----
Properties in Development:
Exton Square Expansion $ -- $ 3,340 $ -- $ 42,643 $ -- $ 3, 340
Expansion of retail center
Exton, PA
The Fashion Show Expansion -- 24,796 -- -- -- 24,796
Expansion of retail center
Las Vegas, NV
Pioneer Place Expansion -- 2,813 -- 15,971 -- 2,813
Expansion of mixed-use project
Portland, OR
Arizona Center -- -- -- 12,992 -- --
Developed/developable land
under master lease
Phoenix, AZ
Rouse Commercial Properties, Inc -- 6,955 -- -- -- 6,955
Developed/developable land
Primarily Baltimore and Landover, MD
Owings Mills Expansion -- 4,665 -- 1,890 -- 4,665
Expansion of retail center
Baltimore County, MD
Plymouth Meeting Expansion -- -- -- 6,225 -- --
Expansion of retail center
Montgomery County, PA
Gross amount at which carried
at close of period
----------------------------
Life on
Buildings Accumulated Date of which depre-
and depreciation completion ciation in late
Improve and of Date income state-
Description ments Total amortization construction acquired ment is computed
----------- ----- ----- ------------ ------------ -------- ----------------
Properties in Development:
Exton Square Expansion $ 42, 643 $ 45,983 $ -- N/A N/A N/A
Expansion of retail center
Exton, PAN
The Fashion Show Expansion -- 24,796 -- N/A N/A N/A
Expansion of retail center
Las Vegas, NV
Pioneer Place Expansion 15,971 18,784 -- N/A N/A N/A
Expansion of mixed-use project
Portland, OR
Arizona Center 12,992 12,992 -- N/A N/A N/A
Developed/developable land
under master lease
Phoenix, AZ
Rouse Commercial Properties, -- 6,955 -- N/A N/A N/A
Inc
Developed/developable land
Primarily Baltimore and Landover, MD
Owings Mills Expansion 1,890 6,555 -- N/A N/A N/A
Expansion of retail center
Baltimore County, MD
Plymouth Meeting Expansion 6,225 6,225 -- N/A N/A N/A
Expansion of retail center
Montgomery County, PA
IV-30
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized Gross amount
Initial cost subsequent at which carried
to Company to acquisition at close of period
----------------------- -------------------- ------------------------
Buildings Buildings Accumulated
and and Depreciation
Encum- Improve Improve Carrying Improve and
Description brances Land ments ments costs Land ments Total amortization
----------- ------- ------ --------- ------ ---------- ------ --------- ------- ------------
Moorestown Mall Expansion $ -- $ -- $ -- $ 4,861 $ -- $ -- $ 4,861 $ 4,861 $ --
Expansion of retail center
Morrestown, NJ
Perimeter Mall Expansion -- -- -- 4,857 -- -- 4,857 4,857 --
Expansion of retail center
Atlanta, GA
Oviedo Marketplace Expansion -- -- -- 3,974 -- -- 3,974 3,974 --
Expansion of retail center
Orlando, FL
Oakwood Center Expansion -- 1,188 -- 2,620 -- 1,188 2,620 3,808 --
Expansion of retail center
Gretna, LA
Mall St. Matthews Expansion -- -- -- 2,969 -- -- 2,969 2,969 --
Expansion of retail center
Louisville, KY
Airport Center Bldgs 40 & 51 -- -- -- 816 -- -- 816 816 --
Office Building in development
Las Vegas, NV
Airport Center Bldg 50 -- -- -- 480 -- -- 480 480 --
Office Building in development
Las Vegas, NV
3993 Howard Hughes Parkway -- -- -- 776 -- -- 776 776 --
Office Building in development
Las Vegas, NV
Life on
Date of which depreciation
completion in latest
of Date income state-
Description construction acquired ment is computed
----------- ------------ -------- ------------------
Moorestown Mall Expansion N/A N/A N/A
Expansion of retail center
Morrestown, NJ
Perimeter Mall Expansion N/A N/A N/A
Expansion of retail center
Atlanta, GA
Oviedo Marketplace Expansion N/A N/A N/A
Expansion of retail center
Orlando, FL
Oakwood Center Expansion N/A N/A N/A
Expansion of retail center
Gretna, LA
Mall St. Matthews Expansion N/A N/A N/A
Expansion of retail center
Louisville, KY
Airport Center Bldgs 40 & 51 N/A 06/96 N/A
Office Building in development
Las Vegas, NV
Airport Center Bldg 50 N/A 06/96 N/A
Office Building in development
Las Vegas, NV
3993 Howard Hughes Parkway N/A 06/96 N/A
Office Building in development
Las Vegas, NV
IV - 31
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized
subsequent Gross amount at which carried
Initial cost to Company to acquisition at close of period
-------------------------- ----------------------- -----------------------------
Buildings Buildings
and and
Encum- Improve Improve Carrying Improve
Description brances Land ments ments costs Land ments Total
----------- -------- -------- ---------- ----------- ---------- --------- ---------- -----------
Pre-construction costs - $ -- $ -- $ -- $ 30,098 $ -- $ -- $ 30,098 $ 30,098
various projects
Pre-construction reserve -- -- -- (15,908) -- -- (15,908) (15,908)
Other projects less than 5% -- 6,987 -- 1,352 -- 6,987 1,352 8,339
of total
------------------------------ ---------------------- ---------------------------------
Total Properties
in Development -- 50,744 -- 116,616 -- 50,744 116,616 167,360
------------------------------ ---------------------- ---------------------------------
Properties held for sale :
Valley Fair Mall 40,000 39,504 109,888 (55) -- 39,504 109,833 149,337
Retail Center
San Jose, CA
Westdale Mall -- -- 13,664 306 -- -- 13,970 13,970
Investment in unconsolidated real
estate venture
Cedar Rapids, IO
Other properties held for
sale,
less than 5% of total 2,984 1,003 1,608 (24) -- 1,003 1,584 2,587
------------------------------------- ---------------------- ---------------------------------
42,984 40,507 125,160 227 -- 40,507 125,387 165,894
------------------------------------- ---------------------- ---------------------------------
Total Property $2,948,324 $579,365 $1,513,535 $2,959,081 $ -- $ 579,365 $4,472,616 $5,051,981
===================================== ====================== =================================
Life on
Accumulated which depreciation
depreciation Date of in latest
and completion of Date income statement
Description amortization construction acquired is computed
----------- --------------- -------------- ------------- -------------------
Pre-construction costs - N/A N/A N/A N/A
various projects
Pre-construction reserve N/A N/A N/A N/A
Other projects less than 5% N/A N/A N/A N/A
of total
Total Properties
in Development
Properties held for sale :
Valley Fair Mall -- 06/86 07/98 N/A
Retail Center
San Jose, CA
Westdale Mall -- 07/79 10/98 N/A
Investment in unconsolidated real estate
venture
Cedar Rapids, IO
Other properties held for
sale,
less than 5% of total --
---------------
--
===============
Total Property $578,311
===============
IV - 32
Schedule III continued
----------------------
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
Notes:
(1) Reference is made to notes 1, 4 and 7 to the consolidated financial
statements.
(2) The determination of these amounts is not practicable and, accordingly,
they are included in improvements.
(3) Buildings and improvements include deferred costs of $106,388,000 at
December 31, 1998.
(4) The changes in total cost of properties for the years ended December
31, 1998, 1997 and 1996 are as follows (in thousands):
1998 1997 1996
---------- ---------- ----------
Balance at beginning of year $3,332,363 $3,691,600 $3,052,873
Additions, at cost 336,002 317,705 158,205
Cost of properties acquired 1,593,062 84,743 602,944
Additions to land held for
development and sale --- 134,447 48,474
Cost of land sales (21,885) (131,310) (57,204)
Retirements, sales and other
dispositions (185,861) (114,435) (85,167)
Property of subsidiaries in which a
majority voting interest was sold
to an affiliate --- (621,338) ---
Additions to preconstruction reserve (1,700) (2,800) (2,700)
Provision for loss on operating properties --- (26,249) (25,825)
---------- ---------- ----------
Balance at end of year $5,051,981 $3,332,363 $3,691,600
========== ========== ==========
(5) Reference is made to the consolidated statements of cash flows for
explanation of noncash consideration included in property additions.
(6) Reference is made to note 3 to the consolidated financial statements
for explanation of transactions with affiliates.
IV-33
Schedule III continued
----------------------
THE ROUSE COMPANY AND SUBSIDIARIES
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
Notes:
(7) The changes in accumulated depreciation and amortization for the years
ended December 31, 1998, 1997 and 1996 are as follows (in thousands):
1998 1997 1996
---------- ---------- ----------
Balance at beginning of year $ 515,229 $ 552,201 $ 519,319
Depreciation and amortization
charged to operations 84,068 86,009 79,990
Retirements, sales and other, net (20,986) (50,814) (47,108)
Accumulated depreciation on properties
of subsidiaries in which a majority
voting interest was sold to an
affiliate --- (72,167) ---
--------- --------- ---------
Balance at end of year $ 578,311 $ 515,229 $ 552,201
========= ========= =========
(8) The aggregate cost of properties for Federal income tax purposes is
approximately $4,579,728,000 at December 31, 1998.
(9) Reference is made to note 1(c) to the consolidated financial statements
for information related to depreciation.
(10) Reference is made to note 11 to the consolidated financial statements
for information related to provisions for losses on real estate assets.
(11) Certain amounts for prior years have been reclassified to conform to
the presentation for 1998.
IV-34
Schedule IV
THE ROUSE COMPANY AND SUBSIDIARIES
Mortgage Loans On Real Estate
December 31, 1998
(in thousands)
Principal amount
of loans
subject to
Final Carrying delinquent
maturity date Periodic Face amount amount of principal or
Description (Note 1) Interest rate (Note 1) payment terms Prior leins of mortgages mortgages interest
- ------------------------- ------------- -------------- ------------- ----------- ------------ -------------- ---------------
Howard Research
And Development
Corporation and
Subsidiaries Note 2 Dec. 31, 2012 Note 1 N/A $ 179,422 $ 179,422 None
Howard Hughes
Properties, Inc. Note 2 Dec. 31, 2012 Note 1 N/A 168,690 168,690 None
HRD Properties, Inc.
and Subsidiaries Note 3 Dec. 31, 2012 Note 1 N/A 14,055 14,055 None
-------- --------
$ 362,167 $ 362,167
======== ========
IV-35
Schedule IV continued
THE ROUSE COMPANY AND SUBSIDIARIES
MORTGAGE LOANS ON REAL ESTATE
December 31, 1998
Notes:
(1) The deed of trust notes receivable of the Company are secured by certain
land and operating properties and general assignments of rents of the
Real Estate Ventures owned by The Rouse Company Incentive Compensation
Statutory Trust and The Rouse Company. These notes are due December 31,
2012 and minimum principal payments, based on a thirty-year amortization
schedule, are due quarterly. Specified principal payments are also
required when land is released from the deed of trust; however, payments
made due to partial releases reduce or offset the required quarterly
payments.
(2) The notes bear interest at 12.25% through December 2000, and at the
greater of the prime rate plus 3.75% or 10% thereafter to maturity or
repayment.
(3) The note bears interest at 12.25% throughout the term.
(4) Balance at beginning of year $ 380,232,000
Collections of principal (18,065,000)
-------------
Balance at end of year $ 362,167,000
=============
(5) The deed of trust notes are carried in investments in and advances to
unconsolidated real estate ventures on the Company's balance sheets
at December 31, 1998 and 1997. See note 3 to the consolidated financial
statements regarding the transactions that gave rise to the deed of
trust notes.
IV-36
Schedule II
-----------
REAL ESTATE VENTURES OWNED BY
THE ROUSE COMPANY INCENTIVE COMPENSATION STATUTORY TRUST AND THE ROUSE COMPANY
Valuation and Qualifying Accounts
Year ended December 31, 1998
(in thousands)
Additions
----------------------
Balance at Charged to Charged to Balance at
beginning Costs and other end of
Descriptions of year expenses accounts Deductions year
------------ ---------- ---------- ---------- ---------- ------------
Year ended December 31, 1998:
Allowance for doubtful receivables $ 830 $ 359 $ --- $ 355(1) $ 834
========== ========== ========== ========== ==========
Note:
(1) Balances written off as uncollectible.
IV-37
Schedule III
------------
REAL ESTATE VENTURES OWNED BY
THE ROUSE COMPANY INCENTIVE COMPENSATION STATUTORY TRUST
AND THE ROUSE COMPANY
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized subsequent Gross amount at which
Initial cost to Company to acquisition carried at close of period
---------------------------- ---------------------------- ---------------------------
Buildings
Buildings and
and Carrying Improve
Emcum- Improve Improve costs ments
Description brances Land ments ments (notes 2) Land (note 3) Total
- ------------------------- ------- ---- ----- -------- --------- ---- -------- -----
Operating Properties:
The Mall in Columbia $204,185 $4,788 $ - $ 69,946 $ - $ 4,788 $ 69,946 $74,734
Retail center
Columbia, MD
White Marsh 41,147 6,392 - 43,020 - 6,392 43,020 49,412
Retail center
Baltimore, MD
Seventy Columbia Corp Ctr 28,677 856 - 24,246 - 856 24,246 25,102
Office building
Columbia, MD
Forty Columbia Corp Ctr 3,919 636 - 15,606 - 636 15,606 16,242
Office building
Columbia, MD
Fifty Columbia Corp Ctr 3,522 463 - 15,280 - 463 15,280 15,743
Office building
Columbia, MD
Thirty Columbia Corp Ctr 3,421 1,160 - 10,988 - 1,160 10,988 12,148
Office building
Columbia, MD
Hickory Ridge Village Ctr 13,754 907 - 10,186 - 907 10,186 11,093
Community retail center
Columbia, MD
Dorsey Search Village Ctr 14,881 911 - 9,752 - 911 9,752 10,663
Community retail center
Columbia, MD
Accumulated Life on
depreciation Date of which depreciation
and completion of Date in latest income
Description amortization construction acquired statement is computed
- ------------------------- ------------ ------------ -------- ---------------------
Operating Properties:
The Mall in Columbia $ 13,026 8/71 12/97 Note 7
Retail center
Columbia, MD
White Marsh 5,208 8/81 12/97 Note 7
Retail center
Baltimore, MD
Seventy Columbia Corp Ctr 5,244 6/92 12/97 Note 7
Office building
Columbia, MD
Forty Columbia Corp Ctr 5,274 6/87 12/97 Note 7
Office building
Columbia, MD
Fifty Columbia Corp Ctr 4,185 11/89 12/97 Note 7
Office building
Columbia, MD
Thirty Columbia Corp Ctr 4,438 4/86 12/97 Note 7
Office building
Columbia, MD
Hickory Ridge Village Ctr 1,817 6/92 12/97 Note 7
Community retail center
Columbia, MD
Dorsey Search Village Ctr 2,264 9/89 12/97 Note 7
Community retail center
Columbia, MD
IV-38
REAL ESTATE VENTURES OWNED BY
THE ROUSE COMPANY INCENTIVE COMPENSATION STATUTORY TRUST
AND THE ROUSE COMPANY
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized
subsequent Gross amount at which
Initial cost to Company to acquisition carried at close of period
------------------------ ------------------------ ----------------------------------
Buildings
Builidngs and
and Carrying Improve
Encum- Improve Improve costs ments
Description brances Land ments ments (note 2) Land (note 3) Total
----------- ------- ---- -------- ------- --------- ---- --------- -----
Twenty Columbia Corp Ctr $ 2,405 $ 927 $ -- $ 9,619 $ -- $ 927 $ 9,619 $ 10,546
Office building
Columbia, MD
Harper's Choice 9,233 546 -- 9,323 -- 546 9,323 9,869
Community retail center
Columbia, MD
American City Building 2,812 -- -- 9,346 -- -- 9,346 9,346
Office building
Columbia, MD
Kings Contrivance 22,724 1,072 -- 7,187 -- 1,072 7,187 8,259
Community retail center
Columbia, MD
Ten Columbia Corp Ctr 2,732 733 -- 7,440 -- 733 7,440 8,173
Office building
Columbia, MD
Wilde Lake 20,252 1,486 -- 6,525 -- 1,486 6,525 8,011
Community retail center
Columbia, MD
Oakland Mills 1,141 447 -- 5,842 -- 447 5,842 6,289
Community retail center
Columbia, MD
Long Reach Village Ctr 4,693 1,009 -- 5,167 -- 1,009 5,167 6,176
Community retail center
Columbia, MD
Accumulated Life on
depreciation Date of which depreciation
and completion of Date in latest income
Description amoritization construction required statement is computed
----------- ------------- ------------- -------- ---------------------
Twenty Columbia Corp Ctr $ 3,912 6/81 12/97 Note 7
Office building
Columbia, MD
Harper's Choice 2,512 6/71 12/97 Note 7
Community retail center
Columbia, MD
American City Building 7,802 6/69 12/97 Note 7
Office building
Columbia, MD
Kings Contrivance 2,435 6/86 12/97 Note 7
Community retail center
Columbia, MD
Ten Columbia Corp Ctr 2,797 9/81 12/97 Note 7
Office building
Columbia, MD
Wilde Lake 3,294 7/67 12/97 Note 7
Community retail center
Columbia, MD
Oakland Mills 1,510 6/69 12/97 Note 7
Community retail center
Columbia, MD
Long Reach Village Ctr 1,090 6/74 12/97 Note 7
Community retail center
Columbia, MD
IV-39
REAL ESTATE VENTURES OWNED BY
THE ROUSE COMPANY INCENTIVE COMPENSATION STATUTORY TRUST
AND THE ROUSE COMPANY
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized
subsequent Gross amount at which
Initial cost to Company to acquisition carried at close of period
------------------------ ------------------------ ----------------------------------
Buildings
Builidngs and
and Carrying Improve
Encum- Improve Improve costs ments
Description brances Land ments ments (note 2) Land (note 3) Total
----------- ------- ---- -------- ------- --------- ---- --------- -----
Dobbin Road $ 3,724 $ 426 $ -- $ 4,848 $ -- $ 426 $ 4,848 $ 5,274
Community retail center
Columbia, MD
Columbia Crossing 5,973 945 -- 3,794 -- 945 3,794 4,739
Community retail center
Columbia, MD
Ridgley Building 11,334 670 -- 3,881 -- 670 3,881 4,551
Office building
Columbia, MD
Oakland Building 695 -- -- 4,150 -- -- 4,150 4,150
Office building
Columbia, MD
Sterrett Building 1,212 308 -- 3,689 -- 308 3,689 3,997
Office building
Columbia, MD
Teachers Building 8,679 -- -- 3,100 -- -- 3,100 3,100
Office building
Columbia, MD
Lynx Lane 8,123 150 -- 2,827 -- 150 2,827 2,977
Community retail center
Columbia, MD
Other properties and related
investments less than
5% of total 2,582 1,191 -- 15,075 -- 1,191 15,075 16,266
---------------------------------- ---------------------- ----------------------------------
Total Operating Properties 421,820 26,023 -- 300,837 -- 26,023 300,837 326,860
---------------------------------- ---------------------- ----------------------------------
Accumulated Life on
depreciation Date of which depreciation
and completion of Date in latest income
Description amoritization construction required statement is computed
----------- ------------- ------------- -------- ---------------------
Dobbin Road $ 1,545 6/83 12/97 Note 7
Community retail center
Columbia, MD
Columbia Crossing 235 11/98 12/97 Note 7
Community retail center
Columbia, MD
Ridgley Building 2,296 6/72 12/97 Note 7
Office building
Columbia, MD
Oakland Building 2,359 6/71 12/97 Note 7
Office building
Columbia, MD
Sterrett Building 2,172 6/72 12/97 Note 7
Office building
Columbia, MD
Teachers Building 1,021 6/69 12/97 Note 7
Office building
Columbia, MD
Lynx Lane 1,199 6/73 12/97 Note 7
Community retail center
Columbia, MD
Other properties and related
investments less than
5% of total 4,755
--------------
Total Operating Properties 82,390
--------------
IV-40
REAL ESTATE VENTURES OWNED BY
THE ROUSE COMPANY INCENTIVE COMPENSATION STATUTORY TRUST
AND THE ROUSE COMPANY
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized subsequent Gross amount at which
Initial cost to Company to acquisition carried at close of period
----------------------- ----------------------------- --------------------------
Buildings
Buildings and
and Carrying Improve
Encum- Improve Improve costs ments
Description brances Land ments ments (note 2) Land (note 3) Total
----------- ------- ---- ----- ------- -------- ---- -------- -----
Properties in Development:
Columbia Mall $ -- $ 2,000 $ -- $ 38,352 $ -- $ 2,000 $ 38,352 $ 40,352
Expansion of retail center
Columbia, MD
60 Columbia Corporate Center 4,641 1,050 -- 8,356 -- 1,050 8,356 9,406
New Office Building
Columbia, MD
3993 Howard Hughes Parkway -- 332 -- 4,862 -- 332 4,862 5,194
New Office Building
Las Vegas, NV
Village 12 Arbors East 1 ,451 535 -- 4,068 -- 535 4,068 4,603
New Office Building
Las Vegas, NV
Airport Center 40/51 -- 547 -- 1,944 -- 547 1,944 2,491
New Office Building
Las Vegas, NV
Airport Center 50 -- 754 -- 1,504 -- 754 1,504 2,258
New Office Building
Las Vegas, NV
Other properties less than 5%
of total -- -- 2,138 -- -- 2,138 2,138
-------------------------- -------------------- ---------------------------------
Total Properties
in Development 6,092 5,218 -- 61,224 -- 5,218 61,224 66,442
-------------------------- -------------------- ---------------------------------
Accumulated Life on
depreciation Date of which depreciation
and completion of Date in latest income
Description amortization construction acquired statement is computed
----------- -------------- ------------ --------- ----------------------
Properties in Development: $ -- N/A 12/97 N/A
Columbia Mall -- N/A 12/97 N/A
Expansion of retail center
Columbia, MD
60 Columbia Corporate Center -- N/A 12/97 N/A
New Office Building
Columbia, MD
3993 Howard Hughes Parkway -- N/A 12/97 N/A
New Office Building
Las Vegas, NV
Village 12 Arbors East -- N/A 12/97 N/A
New Office Building
Las Vegas, NV
Airport Center 40/51 -- N/A 12/97 N/A
New Office Building
Las Vegas, NV
Airport Center 50 -- N/A 12/97 N/A
New Office Building
Las Vegas, NV
Other projects less than 5%
of total -- N/A 12/97 N/A
IV-41
REAL ESTATE VENTURES OWNED BY
THE ROUSE COMPANY INCENTIVE COMPENSATION STATUTORY TRUST
AND THE ROUSE COMPANY
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
(in thousands)
Costs capitalized subsequent Gross amount at which
Initial cost to Company to acquisition carried at close of period
----------------------- ----------------------------- --------------------------
Buildings
Buildings and
and Carrying Improve
Encum- Improve Improve costs ments
Description brances Land ments ments (note 2) Land (note 3) Total
----------- --------- ---- ----- ----- -------- ---- -------- -----
Investment land and land
held for development
and sale:
Columbia $ 33,369 $ 53,000 $ -- $ 53,564 $ -- $106,564 $ -- $106,564
Land in various stages of
development
Columbia, MD
Summerlin 174,422 89,076 -- 6,421 -- 95,497 -- 95,497
Land in various stages of
development
Las Vegas, NV
Nevada Investment Land 38,149 20,631 -- 20,525 -- 41,156 -- 41,156
Canyon Springs 14,959 12,872 -- 11,898 -- 24,770 -- 24,770
Land held for development
Riverside County, CA
Bridgewater Commons -- 10,054 -- 59 -- 10,113 -- 10,113
Land held for sale
Bridgewater, NJ
Other less than 5% of total -- 55 -- -- 55 -- 55
---------------------------------- --------------------------- ------------------------------------
Total investment land and
land held for development
and sale 260,899 185,688 -- 92,467 -- 278,155 -- 278,155
----------------------------------- --------------------------- ------------------------------------
Total Property $688,811 $216,929 $ -- $ 454,528 $ -- $309,396 $362,061 $671,457
=================================== =========================== ====================================
Accumulated Life on
depreciation Date of which depreciation
and completion of Date in latest income
Description amortization construction acquired statement is computed
----------- ------------ ------------ --------- ----------------------
Land held for development
and sale:
Columbia N/A N/A 12/97 N/A
Land in various stages of
development
Columbia, MD
Summerlin N/A N/A 12/97 N/A
Land in various stages of
development
Las Vegas, NV
Nevada Investment Land N/A N/A 12/97 N/A
Canyon Springs N/A N/A 12/97 N/A
Land held for development
Riverside County, CA
Bridgewater Commons N/A N/A 12/97 N/A
Land held for sale
Bridgewater, NJ
Other properties held for
sale, less than 5% of total --
----------
--
----------
Total Property $ 82,390
==========
IV-42
Schedule III continued
REAL ESTATE VENTURES OWNED BY
THE ROUSE COMPANY INCENTIVE COMPENSATION STATUTORY TRUST
AND THE ROUSE COMPANY
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
Notes:
(1) Reference is made to notes 1, 2 and 5 to the combined consolidated
financial statements. As indicated in note 1, the Ventures retained
The Rouse Company's historical cost basis in the assets acquired and
liabilities assumed on December 31, 1997. Accordingly, historical
data have been presented with respect to the allocation of the gross
historical cost of properties at December 31, 1998 between initial cost
and costs capitalized subsequent to acquisition.
(2) The determination of these amounts is not practicable and, accordingly,
they are included in improvements.
(3) Buildings and improvements include deferred costs of $10,472,000 at
December 31, 1998.
(4) The changes in total cost of properties for the years ended December 31,
1998 is as follows (in thousands):
Balance at beginning of year $ 619,295
Additions, at cost 82,289
Cost of properties acquired 10,054
Additions to land held for
development and sale 82,656
Cost of land sales (77,771)
Retirements, sales and other
dispositions (45,066)
----------
Balance at end of year $ 671,457
==========
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Schedule III continued
----------------------
REAL ESTATE VENTURES OWNED BY
THE ROUSE COMPANY INCENTIVE COMPENSATION STATUTORY TRUST
AND THE ROUSE COMPANY
Real Estate and Accumulated Depreciation (note 1)
December 31, 1998
Notes:
(5) The changes in accumulated depreciation and amortization for the year
ended December 31, 1998 is as follows (in thousands):
Balance at beginning of year $ 72,000
Depreciation and amortization
charged to operations 10,585
Retirements, sales and other, net (195)
----------
Balance at end of year $ 82,390
==========
(6) The aggregate cost of properties for Federal income tax purposes is
approximately $1,071,814,000 at December 31, 1998.
(7) Reference is made to note 1(c) to the combined consolidated financial
statements for information related to depreciation.
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SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
The Rouse Company
By: /s/Anthony W. Deering
---------------------------------------
Anthony W. Deering March 30, 1999
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Principal Executive Officer:
/s/Anthony W. Deering
---------------------------------------
Anthony W. Deering March 30, 1999
Chairman of the Board, President
and Chief Executive Officer
Principal Financial Officer:
/s/Jeffrey H. Donahue
---------------------------------------
Jeffrey H. Donahue March 30, 1999
Executive Vice President and
Chief Financial Officer
Principal Accounting Officer:
/s/George L. Yungmann
---------------------------------------
George L. Yungmann March 30, 1999
Senior Vice President and Controller
IV-45
Board of Directors:
David H. Benson, Jeremiah E. Casey, Anthony W. Deering, Rohit M. Desai,
Mathias J. DeVito, Juanita T. James, William R. Lummis, Thomas J. McHugh, Hanne
M. Merriman, Roger W. Schipke, Alexander B. Trowbridge and Gerard J. M. Vlak.
By: /s/Anthony W. Deering
---------------------------------------
Anthony W. Deering March 30, 1999
For himself and as
Attorney-in-fact for
the above-named persons
IV-46