Rouse to buy more office properties $375 million deal is buyout of partner Teachers Properties

'Fits our strategy'

Purchase not linked to recently obtained loan, company says

Commercial real estate

July 10, 1998|By Sean Somerville | Sean Somerville,SUN STAFF

Moving to boost its share of the state's office space, the Rouse Co. said yesterday that it will buy 67 office and industrial buildings and 107 acres ranging from Hunt Valley to Silver Spring in a $375 million deal.

The acquisitions will give Rouse full ownership of the properties it manages under an agreement with Teachers Properties Inc. The two companies formed the partnership in 1988 to buy the real estate holdings of Sparks-based McCormick & Co. Inc. for $550 million. That deal gave Teachers 95 percent ownership and Rouse 5 percent.

Since then, the Rouse-Teachers Properties Inc. partnership has sold properties in Florida, North Carolina and Maryland. The $375 million price for the remaining properties includes Rouse's $19 million stake in the partnership, $53 million in cash, $203 million in assumed and other debt and $100 million in Rouse common stock.

`We know the properties very well, and we like this market area," said Anthony W. Deering, Rouse chairman and chief executive. "It's a solution that fits our company's long-term strategy.`

Rouse, which has recently focused its attention on mixed-use office buildings, high-end retail shopping malls and community development, said the deal makes it a more serious player in office buildings statewide.

The addition of the buildings -- 66 of the 67 are in Maryland -- fTC increases Rouse's office and industrial holdings in the state four-fold, from 20 to 86, and boosts its square footage by 4.4 million, to 6.5 million.

"If a company decides they want to be in the Baltimore-Washington market, now they have to think about talking to us," said David Tripp, vice president and director of investor relations and corporate communications. "That's the kind of dominance we want."

Yesterday's deal came three days after Rouse announced that it had secured $800 million in financing, capital it plans to use to buy Towson Town Center and six other malls from Toronto-based TrizecHahn Corp.

Tripp said yesterday's acquisition was not connected to the financing package, which was intended to help the company complete the TrizecHahn deal and to increase its credit line.

Shares of Rouse closed yesterday at $31.375, down 87.5 cents

Teachers Properties Inc., a subsidiary of the world's largest pension system, TIAA-CREF, could not be reached for comment on the transaction.

"Institutions make decisions that they don't want to be investors," Tripp said. "Clearly, that's what they're doing here. The time was right for them not to be involved. The logical buyer when a partner wants out is the other partner."

Attracted by low vacancy rates, investors have been snapping up office properties at a torrid pace. At the same time, pension funds and insurers have been trading properties for shares in real estate investment trusts such as Rouse. Last month, Teachers said it would sell the Bloomington, Minn.-based Mall of America, the nation's largest shopping mall.

Rouse may sell some of the properties to help raise the $53 million cash needed for the deal, but the company intends to continue to manage the buildings and to develop the land into office buildings, Tripp said.

The 67 buildings are included in 25 office properties and three industrial properties. Seven of the office properties are in Hunt Valley, and seven are near Landover in Prince George's County. The rest are in Columbia, Silver Spring and in Baltimore County, west of Baltimore. One office property is near Harrisburg, Pa.

The properties include the Hunt Valley Business Community's 16 buildings, the Rutherford Business Center in the Woodlawn section of Baltimore County, and the Silver Spring Metro Center.

The land parcels are in Hunt Valley, Woodlawn and near Landover. The transaction is subject to approval by the boards of both companies, and the deal is expected to close about Oct. 31.

Cliff Ransom, an analyst for Boston, Mass.-based State Street Research and Management, said, "I just think it's Rouse taking over the old McCormick portfolio. I have to assume they paid a decent price. They're pretty careful about that."

He said the deal "steps up" office holdings of Rouse, which owns and manages more than 250 properties in 25 states and Canada and is the developer of the communities of Columbia and Summerlin, Nev.

Ransom also said the deal is not likely to hold any negative surprises for Rouse, because of its decade of managing the buildings.

Pub Date: 7/10/98

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