General Growth to buy Rouse Chicago firm adds to its mall haul with $7.2 billion purchase

Moving beyond the standard megamall, General Growth PropertiesInc. said Friday it agreed to buy the Rouse Co., owner of suchdestination shopping centers as Water Tower Place and Boston'sFaneuil Hall Marketplace, for $7.2 billion.

The sale, which needs approval from Rouse shareholders to befinal, also gives General Growth ownership of master-plannedresidential and commercial developments in Nevada, Texas andMaryland. Rouse's principal holding is its 40 million square feet ofretail sites, about a quarter of General Growth's size.

Terms call for Rouse stockholders to get $67.50 a share, a 33percent premium over where the shares traded before the deal wasannounced. The news caused Rouse shares to advance $16.04 Friday toclose at $66.65, while Chicago-based General Growth's shares slipped$1.54 to close at $30.

General Growth executives said the premium they paid is justifiedbecause of the potential for higher revenue and lower overhead on theRouse properties. Robert Michaels, General Growth's chief operatingofficer, said the Rouse holdings can benefit from adding restaurants,movie theaters and "streetscape retail."

With a 92 percent occupancy level, the Rouse sites are well-managed, said John Bucksbaum, General Growth's chief executive.Hailing Rouse's collection of "marquee malls," Bucksbaum said thedeal positions his company "to be the industry leader in all aspectsof our business."

General Growth has made $1.5 billion in acquisitions this year andhas changed its focus from developing malls to buying them, usingcontacts with retailers to keep them filled. Bucksbaum called theRouse sale "the equivalent of five full years of acquisitions in onefell swoop."

The sale is expected to close late in 2004. Besides the purchaseprice, General Growth will assume about $5.4 billion in debt.

Rouse also owns scattered office and industrial buildings, whichanalysts said General Growth is liable to sell. But General Growthexecutives said they have a long-term interest in Rouse's master-planned communities.

Employees handling those communities are expected to be offeredjobs at General Growth. Bucksbaum declined to say how many layoffsare likely at Rouse, which is based in Columbia, Md.

Rouse was founded in 1939 by James Rouse, credited with coiningthe term "urban renewal." The company acquired majority interest inWater Tower Place in 2002.

Shopping list

With its acquisition of the Rouse Co., General Growth PropertiesInc. adds to its Chicago-area holdings. The local malls it willcontrol:

*Stratford Square Mall, Bloomingdale

*Water Tower Place, Chicago*

*Ford City Mall, Chicago

*Golf Mill Shopping Center, Niles

*Northbrook Court, Northbrook

*Oakbrook Center, Oak Brook*

*Spring Hill Mall, West Dundee

* Denotes properties Rouse owns.

SOURCES: Rouse Co., General Growth Properties Inc.