- The Washington Times - Friday, August 20, 2004

A Chicago real estate investment company yesterday announced plans to buy the Rouse Co., developer of Columbia, Md., and Harborplace in Baltimore’s Inner Harbor, for $12.6 billion in stock and debt.

General Growth Properties Inc. said it will pay Rouse shareholders $67.50 per share to expand its real estate holdings nationwide. General Growth will take control of Rouse’s 150 properties, including 37 regional malls, six mix-used projects and 40 million square feet overall, to become the second-largest owner of malls in the country. It already owns or manages 178 shopping centers.

News of the merger, which still must be approved by Rouse shareholders and regulators, sent Rouse shares soaring $16.04, or 31.6 percent, to close at $66.65 on the New York Stock Exchange yesterday.

“The Rouse Co.’s portfolio … has always been considered one of the most highly productive and well-positioned collections of properties in our business,” said General Growth Chief Executive Officer John Bucksbaum.

Rouse developed the Mall in Columbia, Towson Town Center and White Marsh Mall, and is completing a massive renovation of the Fashion Show, one of the most popular malls in Las Vegas.

The sale marks another chapter in the storied history of the Columbia company, which was founded in 1939 by James W. Rouse as a homebuilder and evolved into one of the most recognizable real estate developers and urban redevelopers in the Baltimore-Washington region.

In 1963, Rouse made its biggest mark on the region by purchasing more than 14,000 acres that eventually would be transformed into Columbia, one of the first planned communities in the nation and a new model for suburban development.

Rouse’s projects, which also include the Faneuil Hall shopping area in Boston and New York’s South Street Seaport, “changed the way people thought of growth in the suburbs,” said Michael Beyard, a senior fellow at the Urban Land Institute. “It’s a legacy of proving that cities are not dead.”

President Bill Clinton in 1995 awarded Mr. Rouse the Medal of Freedom, the highest honor that can be given to a civilian, for creating a “blueprint for reviving community” and “healing the torn-out heart of America’s cities.” Mr. Rouse died in 1996.

General Growth executives did not say whether Rouse’s Columbia headquarters would be a prominent part of the merged company, but analysts suggested the office’s executive and administration positions could be eliminated to save money. The company has more than 3,100 employees, about 200 of whom are based locally.

General Growth is expected to sell any office properties it acquires in the deal and could sell Rouse’s land-development business, analysts said. By selling some parts of the business, General Growth would be able to reduce its $23 billion debt load, which now makes up for 71 percent of its total capitalization, by far the highest in the industry.

Members of the local business community said they feared Rouse’s development philosophy could change after the sale. Real estate analysts said Rouse has a reputation as a pioneer because of Columbia, Harborplace and other developments that were ahead of their time.

“The question you have to ask is how much will it modify their operations … and you have to concern yourself with, well, General Growth is based elsewhere,” said H. Walter Townshend III, president and chief executive officer of the Baltimore/Washington Corridor Chamber of Commerce.

But other analysts said Rouse in recent years has functioned like most other real estate companies.

“They had evolved into a more mainstream type of commercial developer … the company in the later years was more conventional and in the mainstream of the field,” Mr. Beyard said.

Of greater concern to some area businesses is whether the acquisition will affect Rouse’s community involvement. Rouse executives sit on numerous boards of directors for area charities, and Mr. Rouse and his wife, Patty, founded the Enterprise Foundation, a nonprofit community development organization.

“Rouse has been a big supporter of the community,” said Cole Schnorf, a principal with Manekin, a Columbia real estate firm that has worked with Rouse. “The emotional part of me is disappointed [with the sale], but when you sit back and think about it dispassionately, it’s business.”

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