CLOCKWISE FROM TOP LEFT: On March 29th, Pioneer Place in Portland, Oregon celebrated its expansion opening with a new retail pavilion and an expanded Saks Fifth Avenue. Ⅲ The Company’s new in-line Premier Customer Service Centers debuted at Park Meadows in Denver, Colorado and at Exton Square in Exton, Pennsylvania. Ⅲ A new Class-A office building, 3993 Howard Hughes Parkway, at Hughes Center in Las Vegas, was nearly 100% leased by year-end. Ⅲ On May 3rd, Exton Square, in the northern suburbs of Philadelphia, celebrated its grand re-opening. Ⅲ On November 18th, a new Burdines joined Oviedo Marketplace in the growing suburbs of Northeastern Orlando. Ⅲ Ranking first nationally in home sales for the eighth time in the last nine years, the community of Summerlin in Las Vegas, Nevada boasted 3,173 total new homes sold in 2000. Ⅲ The official groundbreaking for the expan- sion of Fashion Show was held on May 22nd, highlighted by a Randolph Duke fashion extravaganza in Las Vegas. Ⅲ Baltimore’s Harborplace cel- ebrated its 20th Anniversary on July 2nd, with a week of events and fes- tivities. Ⅲ The legendary Tiffany & Company opened at Pioneer Place in Portland, Oregon on November 17th. Ⅲ Perimeter Mall, in the affluent suburbs of Atlanta, opened its pedestrian-friendly, streetscape-style expansion of retailers and restaurants on July 14th. Ⅲ Columbia, Maryland, one of the nation’s most successful large-scale planned communities is now home to 90,000 residents. Ⅲ On November 15th, The Mall in Columbia completed its latest expansion with quality retailers, many new to the Columbia area, and a new food court. THE ROUSE COMPANY YEAR IN REVIEW THE ROUSE COMPANY HIGHLIGHTS 2000 1999 OPERATING RESULTS Total Segment Revenues (note 1) $ 1,064,177,000 $1,031,327,000 Funds from Operations (note 2) $ 252,578,000 $ 223,432,000 Net Earnings $ 170,485,000 $ 135,297,000 FINANCIAL POSITION Total Segment Assets (note 1) $ 5,025,251,000 $5,084,260,000 Debt and Capital Leases (note 1) $ 3,779,715,000 $3,863,470,000 Shareholders’ Equity $ 630,468,000 $ 638,580,000 PER SHARE DATA Earnings Per Share—Diluted $ 2.24 $ 1.69 Funds from Operations Per Share—Diluted $ 3.30 $ 2.82 Dividends Per Share: Common stock $ 1.32 $ 1.20 Preferred stock $ 3.00 $ 3.00 OTHER SELECTED DATA Weighted Average Common Shares Outstanding Used in Diluted Per Share Calculations: Earnings Per Share 72,064,000 74,199,000 Funds from Operations Per Share 77,374,000 81,097,000 Number of Employees 3,749 4,140 Note 1—Amounts are adjusted to include unconsolidated real estate ventures in which the Company holds a majority of the financial interest, but does not own a majority voting interest. The Company’s proportionate share of assets, debt, capital leases and revenues of certain unconsolidated real estate ventures accounted for using the equity method of accounting are included in these amounts. Revenues also include the Company’s share of FFO of other unconsolidated real estate ventures in which it holds a minority interest. See note 2 of the notes to the consolidated financial statements for a description of these ventures. Note 2—Funds from Operations (FFO) represents revenues less operating, interest and certain current income tax expenses. FFO also includes the Company’s share of FFO of unconsolidated real estate ventures. See the "Funds from Operations" section of Management’s Discussion and Analysis of Financial Condition and Results of Operations on page 53 for further discussion of FFO. 2 LETTER TO SHAREHOLDERS he year 2000 was one of record performance and achievement. Funds From Operations reached $252.6 million, or $3.30 per share, a 17% increase over $2.82 T for 1999. Each of the Company’s three operating lines of business produced record results. In addition, a large number of commercial development projects were opened during the year, and future projects made excellent progress. Net Earnings for 2000 were $170.5 million ($2.24 per share), compared to $135.3 million ($1.69 per share) for 1999. Current Value Shareholders’ Equity, the Company’s internal assessment of the equity value of its assets and liabilities, was estimated to be approximately $2.4 billion, or $36.00 per share, up slightly over 1999. ANTHONY W. DEERING Chairman of the Board and Chief Executive Officer 3 In the fall of 1999, the Board of Directors authorized a $250 million TABLE 1 program to purchase shares of the Company’s common stock in the open market. Slightly more than $100 million worth of stock has been purchased as Total Regional “A” “B” “C” Retail Centers Centers Centers Centers of the end of 2000. 1993 51 (100%) 5 (10%) 13 (25%) 33 (65%) In recognition of the excellent performance in 2000 and the strong 2000 30 (100%) 16 (54%) 10 (33%) 4 (13%) prospects for the future, the Company’s Board of Directors approved an Note: Excludes urban centers, community centers and projects planned for disposition. increase in the 2001 quarterly common stock dividend to $.355 per share, up 8% over $.33 per share, per quarter in 2000. This annual rate of $1.42 repre- TABLE 2 sents a compound growth rate of 14.2% over the 23 years since the dividend program was initiated in 1978. Sales Per Square Foot Occupancy % of NOI RETAIL CENTERS ACHIEVE NEW RECORDS The Company’s portfolio of retail “A” Centers $ 466 97.8% 60% centers performed very well. Notwithstanding the transfer of the Company’s “B” Centers $ 350 95.4% 33% interest in North Star and a softness nationally in retail sales in the fourth quarter “C” Centers $ 317 94.8% 7% of 2000, Funds From Operations from retail centers reached $163 million, a 5% Note: Excludes urban centers, community centers and projects planned for disposition. Sales per square foot data are for comparable tenants, and exclude spaces over 10,000 sq.ft. Occupancy is increase over 1999. The underlying fundamentals of the retail centers were strong as of December 31, 2000, while sales and NOI are for the full year of 2000. throughout 2000. Comparable space sales of merchants in the Company’s retail centers increased by 2% over 1999, even as sales slowed in the fourth quarter’s Over the past seven years, the Company has made significant progress in weakening economic environment. Comparable tenant sales in the same centers upgrading its retail portfolio. Since 1993, interests in 37 centers have been reached $433 per square foot, while the comparable regional center occupancy disposed of or transferred, and most of the present portfolio has been renovated level finished the year at 97%, once again significantly exceeding that of most and/or expanded. Even without the 37 properties that are no longer companies in our industry. New first year rents on space re-leased during 2000 contributing to the Company’s results, Funds From Operations from the retail averaged $40 per square foot, up 25% over the rent previously being paid. center portfolio have grown at a compound rate of 10% since 1993. 4 Under the Company’s internal methodology, the strongest, most Total Funds Higher occupancy levels and increased rents (particularly on Class- From Operations dominant centers are graded as “A” centers; solid centers with good (in millions) A urban space), improved parking revenues and new buildings in growth prospects are rated “B”; and centers with more limited Las Vegas and Summerlin all contributed to the year’s growth. growth potential are designated “C” (although any centers at the $252.6 Late in the year, the Company transferred its interests in 37 lower end of the “C” level would probably be on their way to $223.4 office/flex/industrial buildings in two Las Vegas business parks to a other uses). As Table 1 illustrates, at the end of 2000, 26 of the new joint venture that now owns and operates them. As a result of $198.2 Company’s centers (87%) were rated “A” or “B” compared to only this transaction, the Company received approximately $85 million 18 centers (35%) at the end of 1993. $178.3 in cash proceeds, some of which were used to fund the common More importantly, as Table 2 demonstrates, the higher rated $147.1 stock purchase program. In 2001, Funds From Operations from centers have much better productivity. “A” centers have the highest the office and other properties portfolio will decline due to the sales per square foot, the best occupancy levels and generate a transfer of these 37 buildings to the joint venture. The purchase of disproportionately large share of the Company’s regional center Net the Company’s shares, however, should make the transaction bene- 96 97 98 99 00 Operating Income (NOI). Space in these higher quality centers is ficial to Funds From Operations on a per share basis. in greater demand by merchants, and these centers are also much better able EARNINGS FROM COMMUNITY DEVELOPMENT OPERATIONS TOP $60 MILLION to withstand any downturns in the economy, should they occur. The Company’s two major community development projects, Columbia, The retail centers currently in development (beginning page 8), both new projects Maryland and Summerlin, Nevada, each had an exceptional year, with total oper- and expansions/renovations, will further bolster the high quality level of the ations producing $63.8 million of Funds From Operations, an increase of 33% Company’s portfolio. By 2004, 70% of the Company’s regional retail centers should over 1999. Prior to 2000, the Company’s strategy was to regulate land sales to be “A” rated, and the “B” and “C” properties will be strong and solid producers.