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McGregor retiring at Rouse; Smalley moving up to COO


Rouse Co., in its latest step toward installing a new generation of executive leadership, announced yesterday that Chief Operating Officer Douglas A. McGregor will retire after 30 years with the company.

McGregor, 60, will be replaced by Jerome D. Smalley, 52, formerly the director of commercial and office development at Rouse. The change will take effect Oct. 1.

The announcement was made a month after another longtime Rouse executive, Chief Financial Officer Jeffrey H. Donahue, was replaced by a 44-year-old investment banker from outside the company.

Management changes have been rare throughout the Columbia-based company's 63-year history, leading some analysts to assign a deeper meaning to the recent shuffling of top personnel.

"In my opinion, this is part of a plan," said Matthew Ostrower, an analyst for Morgan Stanley. "There have been a lot of questions lately about where the next generation of leadership of this company is going to come from and who is going to replace [Chief Executive Officer Anthony W. Deering] when he retires. I think the board is trying to put that leadership in place right now."

In his three decades with Rouse, McGregor oversaw some of the company's more conspicuous real estate projects, including the 1996 acquisition of Howard Hughes Properties, which gave Rouse its broad development presence in Las Vegas. He was general manager of the company's development in Columbia during the late 1970s and the 1980s, one of the project's main periods of growth.

Since 1990, McGregor has been responsible for all of the company's development activities. He is to remain with Rouse as a consultant for the next year, as the company absorbs eight retail centers it acquired from Rodamco North American NV this year for $1.5 billion. He was traveling yesterday and could not be reached.

McGregor was paid a salary and bonus of $1.3 million last year, according to company financial statements. He could be entitled to a severance package of three times that amount, depending on the conditions of his departure.

Deering, in an interview, said that he, McGregor and Donahue had been working with Rouse's directors for more than three years to develop a schedule for relinquishing control of the company, and that McGregor's departure is the next step in a "logical and seamless" succession plan.

"It's the nature of the normal evolution of a public company," said Deering, 57, who declined to say when he expects to retire. "It's been a very collaborative process."

Deering, who has been chief executive officer since 1995, is working under a long-term contract that expires in January 2005, when he will turn 60. It specifies an annual base salary of $800,000, with bonuses and stock awards that can total several million dollars more each year.

The company also announced the election yesterday of three executive vice presidents, longtime employees Duke S. Kassolis, Robert Minutoli and Alton J. Scavo.

Analysts see nothing suspicious in the recent departures, particularly given the company's sound financial performance. Rouse diluted its stock by 16.7 million shares to finance the Rodamco deal, but its funds from operations during the first half of the year were $144.6 million, up from $140.5 million in the comparable period the year before.

"There's nothing particularly suspect here," Ostrower said. "Rouse is part of a group that's done quite well, and I would imagine that Mr. McGregor has done well enough, too. He doesn't have to work anymore."

Despite the regard for McGregor, analysts also praised the company's decision to shuffle management as its executives and real estate holdings continue to age.

"We think very, very highly of Doug McGregor," said David M. Fick, a managing director for real estate research at Legg Mason Wood Walker Inc. in Baltimore. "He's a very solid executive who understands the business better than most. It's a loss.

"But the way Rouse breeds management from within has given them a very limited perspective on how to restructure the company, and at the end of the day they needed to make some changes."

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