Rouse to buy HQ, not pull out

Columbia to keep its founding company

`Always our wish to remain here'

With lease lost, developer agrees to $11 million deal

October 11, 2003|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

The Rouse Co. ended a contentious battle over its Columbia headquarters yesterday by agreeing to buy the distinctive white building for $11 million, offering a decisive answer to years of rumors that it wanted to leave the nationally known community it birthed.

Speculation reached a fever pitch in the past week when it came to light that Rouse might be forced out of its Town Center location because it had failed to renew its lease in time.

Some residents feared the company's embarrassing mistake was actually an exit strategy in disguise, because the major developer has shopping centers nationwide and two sizable community development projects in Nevada and Texas, while Columbia is nearing completion. But Rouse officials say they're not going anywhere.

"We are very pleased that we now will own this unique, valuable building, which has been our headquarters for 30 years," Anthony W. Deering, Rouse's chairman and chief executive officer, said in a statement.

"It was always our wish to remain here, and now we will," Deering said.

Rouse originally intended to own its 151,000-square-foot headquarters, but to save money in financially tight times it arranged a sale-leaseback agreement before the building was constructed in 1974. The terms of the 30-year lease allowed Rouse to renew if it notified the landowner - now American Real Estate Holdings Limited Partnership - no later than 15 months before the contract expired.

In what Rouse says was an oversight, the company asked to renew in March, three months late. American Real Estate responded by filing suit to establish its right to kick the company out. Rouse appealed in September after a Baltimore County circuit judge ruled in the landowner's favor.

It was a Goliath vs. Goliath fight. American Real Estate is a subsidiary of American Real Estate Partners of Mount Kisco, N.Y., headed by billionaire financier Carl Icahn. The company owns subdivisions, supermarkets and just about everything in between.

Residents thought they knew how the story would end: with Rouse exiting stage right.

"I was afraid we were going to lose them," said Donna L. Rice, a 32-year resident who represents Town Center on the Columbia Council. "I know they have many, many options - they do not have to stay here if they don't choose to."

She and many others are relieved the firm worked out a way to remain.

"The executive will be ecstatic," said Victoria Goodman, spokesman for County Executive James N. Robey, who was traveling with a local delegation in Europe yesterday on business. "He was obviously very concerned about all of the rumors. He had been in contact with Anthony Deering - they are such an important piece of the fabric of the community."

Aris Melissaratos, state secretary of business and economic development, said he had faith that the company's deep roots in the region would prevail. It was founded in Baltimore in 1939 - three full-time employees in one small office.

"It is the perfect ending to the whole maelstrom," Melissaratos said. "They're a symbol, not only because of the Columbia impact but because of Harborplace. They've always been associated with Maryland."

He added: "We don't have that many headquarters left, so we need them."

Bob Rubenkonig, Rouse's communications director, said the company did not seek concessions to stay in the state, nor did it receive any.

"We ... take pride in being a part of the Columbia community," he said. "We look forward to being a part of the community for many, many years to come."

Benjamin Rosenberg, one of the Baltimore attorneys representing American Real Estate during the lease dispute, declined to comment beyond confirming that the lawsuit is over. Company officials did not return calls yesterday.

Closing for the sale is expected this month.

The $11 million price for the headquarters seemed reasonable to local real estate experts. The assessed value is $8.1 million, but it's not unusual for Howard County property to sell significantly above the benchmark provided by the state.

"Seems like a very fair deal for both landlord and tenant," said Donald R. Reuwer Jr., a Howard County developer, who noted that the large open spaces inside make it less efficient than a typical office building.

Owen Rouse, a senior official at Manekin LLC, a commercial real estate company based in Columbia, said the deal struck him as a bargain for the new owner.

"My guess is [it's] significantly below the replacement cost if you were to build that building on that site today," said Rouse, who is not related to the men who founded The Rouse Co.

The striking building overlooks a lakefront in the heart of the planned community, just across from The Mall in Columbia. It was designed for Rouse by Frank O. Gehry, the now-famed architect responsible for the Guggenheim Museum in Bilbao, Spain.

"It really is a landmark, there's no question about it," said Joe Cronyn, a partner at the Columbia real estate consulting firm of Lipman Frizzell & Mitchell LLC. "It's an architectural gem."

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