Hughes Corp. to Be Acquired by Developer

Howard Hughes Corp., owner of the vast real estate empire amassed by the eccentric billionaire, agreed Thursday to be acquired by prominent East Coast developer Rouse Co. in a $520-million deal.

The agreement, which includes major developments in Los Angeles and Las Vegas, would allow the more than 300 heirs to the Hughes fortune to cash in their stake in the privately held, Las Vegas-based firm.

The company will keep its top management and operate as a subsidiary of Rouse. The heirs, however, will also receive part of the proceeds from future development and sale of Hughes property. The agreement requires the approval of shareholders of both companies.

For Columbia, Md.-based Rouse, the merger would overnight make it the largest developer in the Las Vegas real estate market--one of the nation’s fastest-growing. In Los Angeles, Rouse would assume Hughes’ interest in the 1,087-acre Playa Vista project, which will include the headquarters for DreamWorks SKG and other entertainment-related companies.

“This is a case in which all the parties benefit,” said Hughes President and Chief Executive John L. Goolsby, whose firm would gain greater access to financing through Rouse, a publicly traded firm. “We continue to do what we are doing and expand on it.”

On the New York Stock Exchange on Thursday, Rouse shares were unchanged at $19.875. The talks between the two firms had already been disclosed.

Under the agreement, the Hughes heirs would receive $176 million in Rouse common stock as well as $50 million in notes and cash. Rouse would also assume $294 million in Hughes debt. Separately, Hughes would distribute an estimated $135 million in cash to the heirs once the deal closed, Goolsby said.

The heirs also stand to reap substantial future profit from the development of Hughes property. The owners would receive roughly half the proceeds in the form of Rouse stock.

“Everybody wins if they do better,” said one financial analyst familiar with the deal.

The Hughes acquisition would further boost Rouse’s standing as one of the nation’s largest real estate developers. Its large portfolio of shopping malls and retail centers includes such popular tourist-oriented marketplaces as Boston’s Faneuil Hall and South Street Seaport in New York. The firm also developed its headquarters city of Columbia, one of the nation’s largest planned communities.

Although smaller, Hughes also boasts a large collection of properties, including Summerlin, a 22,500-acre master-planned community in northwest Las Vegas that is expected to grow from about 20,000 residents today to 160,000 when completed.

While Las Vegas has flourished as a result of the booming gaming industry, Rouse has no plans to get involved in that business, said Anthony W. Deering, president and chief executive of Rouse.

“The Nevada market has been a high growth market . . . and we felt that in the next five to 10 years it would have better prospects than other parts of the country,” Deering said in a telephone news conference.

Rouse also expressed optimism about the Los Angeles area, which is showing signs of recovering from a long depression in real estate values and development. “The foundation is there for a strong economic recovery,” Deering said.

In addition to Playa Vista, in which Hughes is a partner with Los Angeles-based developer Maguire Thomas Partners, the firm owns a large office park near Los Angeles International Airport and parcels of land in Marina del Rey, the Hollywood hills and the Riverside area.