Friday, Feb. 22, 2002 | 10:54 a.m.
The Rouse Co., the Las Vegas Valley's largest developer, has quietly taken its most prominent local commercial development off the market due to a softening office sector.
David Tripp, a spokesman for Rouse, said nobody has been willing to pony up the premium price the company wants for the Hughes Center, Rouse's 115-acre, 1 million-square-foot office development at Paradise and Flamingo roads.
"We decided we're not interested in selling Hughes Center for anything less than a good price," said Tripp, who declined to disclose a round number in terms of how much Rouse expects to net from any sale of the office park.
"We didn't get any kind of good, firm price before Sept. 11 and after that, the market for office properties softened fairly significantly," Tripp said. "We're not interested in selling the Hughes Center in these market conditions. We're not under any pressing need to raise capital. We're not actively marketing it at this point, but we wouldn't dissuade a good offer.
"We're very happy with it and we're happy with the money we're getting from it. It doesn't break our hearts not to sell it."
Though a national recession has created a difficult climate for the disposition of big commercial properties, the lower interest rates of the last year helped Rouse post improved fourth-quarter results in the key measure of real estate investment trust performance, despite a slight decline in its net operating income.
For the fourth quarter, Rouse's funds from operations -- the prevailing performance assessment standard in the REIT sector -- rose to $70.8 million, or 93 cents a share, up from $64.4 million, or 86 cents a share, for the same quarter a year ago.
REITs arrive at their funds-from-operations figures by subtracting interest charges and other financing expenses from net operating income, so lower interest rates allow a REIT to post higher funds from operations even if net operating income drops slightly -- as was the case with Rouse in the fourth quarter.
Rouse's net operating income fell in the fourth quarter to $135 million, compared to $136.6 million in the same quarter a year ago.
Tripp said that despite the uncertain economy and the retail sector's uneven performance in recent months, Rouse hasn't reconsidered its strategy of creating a portfolio made up almost exclusively of shopping centers and master-planned communities such as Summerlin, a Las Vegas development of Rouse subsidiary the Howard Hughes Corp.
"We've said pretty consistently over time that while we have three lines of business (retail, office-industrial and master-plans), we think we are one of the top two or three companies in terms of developing, owning and managing large retail properties. Similarly, we are the best in terms of developing and selling land in new communities, like Columbia and Summerlin.
"On the other hand, there are literally hundreds of companies managing office properties. I don't know that we add a whole lot to it. I don't know if we're better at it than anyone else."
Tripp said Rouse would continue to develop office properties in its master-planned communities; Columbia has 90,000 residents and 60,000 jobs, while Summerlin has 60,000 residents and about 10,000 jobs, he said.
"There are opportunities in Summerlin and Columbia for (office) development," Tripp said. "It's not out of the realm of possibility that Summerlin could be to Las Vegas what Scottsdale is to Phoenix -- a high-quality living environment with a lot of community employment.
"But over the long term, we'll take opportunities when they present themselves to sell buildings or projects if the market is good and we feel we can use the capital and personnel more effectively somewhere else."
Tripp said Rouse hasn't yet crunched numbers to project first-quarter results, but he said he expected earnings per share to be off slightly compared with last year due to Rouse's agreement to partner with Westfield America Trust and Simon Property Group to purchase for $5.3 billion the assets of Rodamco North America, a Dutch shopping center developer.
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