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Catellus Announces Third Quarter 2004 Results SAN FRANCISCO, Nov. 3 /PRNewswire-FirstCall/ -- Catellus Development Corporation (NYSE:CDX) today reported earnings per fully diluted share ("EPS") for the third quarter of 2004 of $0.29, compared to $0.20 for the same period in 2003. EPS for the nine months ended September 30, 2004, was $0.93, compared to $0.63 for the same period in 2003. Net income for the third quarter of 2004 was $29.8 million, compared to $20.9 million for the same period in 2003. Net income for the nine months ended September 30, 2004, was $97.2 million, compared to $63.6 million for the same period in 2003. The increase in net income for the third quarter of 2004 is due primarily to a reduced tax expense resulting from the company's conversion to a real estate investment trust, effective January 1, 2004, and gain from the sale of an industrial building. "We are pleased with our performance during and subsequent to the quarter, particularly with regard to our non-core assets," noted Nelson C. Rising, chairman and CEO of Catellus. "Our core development business is on track for the year, we have significantly expanded our foothold in northern New Jersey, one of the country's largest distribution markets, and we have sold or placed under contract for sale a substantial portion of our non-core portfolio, well ahead of our original schedule." Rental Portfolio -- For the third quarter of 2004, rental revenue less property operating costs, including equity in earnings from operating joint ventures and before adjustments for discontinued operations, was $54.7 million, compared to $52.8 million for the same period in 2003. For the nine months ended September 30, 2004, rental revenue less property operating costs, including equity in earnings from operating joint ventures and before adjustments for discontinued operations, was $173.0 million, compared to $166.8 million for the same period in 2003. -- At September 30, 2004, the rental portfolio totaled 40.7 million square feet, 90.0 percent of which is industrial property. The approximate 700,000 square foot decrease from June 30, 2004, was due primarily to the sale of an industrial building in Stockton, California, to a tenant exercising a purchase option. -- The total rental portfolio's occupancy rate at quarter end was 94.2 percent, compared to 95.7 percent at June 30, 2004, and 95.3 percent at September 30, 2003. The decline in occupancy was due, in part, to the anticipated vacancy of a 500,000 square foot industrial building in Stockton, California, and a 423,000 square foot industrial building in Texas. -- The industrial portfolio's occupancy rate at quarter end was 94.8 percent, compared to 96.6 percent at June 30, 2004, and 96.4 percent at September 30, 2003. Development and Investment Activity -- At September 30, 2004, Core Segment construction in progress was 3.5 million square feet: 1.4 million square feet will be added to Catellus' rental portfolio upon completion; one million square feet is development for fee; 791,000 square feet is build-to-suit-for-sale; and 338,000 square feet is included in a joint venture. (See below for a definition of Core Segment.) -- For the 1.4 million square feet of space under construction that will be added to Catellus' rental portfolio upon completion, the projected total cost of development is approximately $98.1 million. These buildings are 16 percent preleased and, when fully leased, are projected to yield a return on cost of approximately 10.9 percent. -- During the quarter, construction commenced on 1.3 million square feet in four projects: a 456,000 square foot build-to-suit-for-sale in Minooka, Illinois; a 428,000 square foot warehouse facility in Atlanta, Georgia; a 335,000 square foot build-to-suit-for-sale in Fontana, California; and a 49,000 square foot build-to-suit-for-lease in Glenview, Illinois. -- During the quarter, Catellus acquired 290 acres of land in Woodbridge, New Jersey, expanding its presence in the northern New Jersey distribution market. The site is approved for up to 3.25 million square feet of industrial space. Development is expected to occur over five to seven years, with a projected total investment, at completion, of approximately $175 million. -- Catellus continues to work with the City of Austin, Texas, on the Master Development Agreement for the redevelopment of Robert Mueller Municipal Airport, which is expected to be executed by year end 2004. Under the proposed agreement, Catellus would act as the master developer, consistent with its long-term strategy to pursue select opportunities to apply its broad set of land development skills to multiple kinds of development projects. Urban, Residential & Other -- During the quarter, the company announced the sale of land capable of supporting 508,000 square feet of commercial space at Mission Bay in San Francisco, California, to Alexandria Real Estate Equities, Inc. -- During the quarter, the company announced it has entered into contracts to sell residential land at Mission Bay, to multiple developers, for approximately $200 million. -- Subsequent to quarter end, Catellus announced the closing of a second transaction with Alexandria Real Estate Equities, Inc. for land capable of supporting up to 935,000 square feet of commercial space at Mission Bay. -- Subsequent to quarter end, Catellus and a joint venture partner entered into a contract to sell the leasehold interest in Mission Place at Mission Bay. Catellus will continue to own fee interest in the land and collect ground rent. The buyer will have an option to purchase the land in 2009 for approximately $61.5 million. -- Subsequent to quarter end, Catellus announced it was in negotiations with the University of California to ground lease to the university a 9.65-acre site at Mission Bay capable of supporting up to one million square feet of commercial space. -- Catellus is in negotiations to sell to a financial investor substantially all of the remaining land and entitlements at Mission Bay; the remaining land at Santa Fe Depot in San Diego, California; West Bluffs, a 114-unit residential development in the Westchester-Playa del Rey area of Los Angeles, California; and Bayport, a 485-unit residential development in Alameda, California. Supplemental Reporting Measure -- The company provides a supplemental performance measure of Funds From Operations ("FFO"), as defined by the National Association of Real Estate Investment Trusts ("NAREIT"), which Catellus believes provides a useful measure, along with GAAP net income, of its operating performance. (Reconciliation of FFO to net income is provided on pages 8 and 9 of this document.) -- Additionally, the company provides FFO in two segments: Core Segment and Urban, Residential, and Other Segment. The first segment, or Core Segment, reflects that part of Catellus' business it expects will be ongoing and central to its future operations. -- The second segment, or Urban, Residential, and Other Segment, reflects the company's urban and residential businesses, including residential lot development, urban development, and desert land sales, which the company intends to transition out of over time. This segment also includes REIT conversion costs, certain of which will continue for approximately three years after January 1, 2004. These costs include third party costs, and the effects of the stock option exchange offer in 2003. -- In presenting FFO prior to beginning operations as a REIT (effective January 1, 2004), Catellus includes "hypothetical tax savings" (including the tax effects of the REIT conversion) that would have occurred had it been a REIT during the prior periods presented. -- FFO, including both segments as defined above, for the third quarter of 2004 was $39.4 million, compared to $45.2 million for the same period in 2003. FFO, including both segments as defined above, for the nine months ended September 30, 2004, was $140.7 million, compared to $131.5 million for the same period in 2003. -- Core Segment FFO for the third quarter of 2004 was $34.1 million, compared to $32.7 million for the same period in 2003. On a fully diluted basis, Core Segment FFO per share for the third quarter of 2004 was $0.33, compared to $0.32 for the same period in 2003. Core Segment FFO for the nine months ended September 30, 2004, was $120.6 million, compared to $109.6 million for the same period in 2003. On a fully diluted basis, Core Segment FFO per share for the nine months ended September 30, 2004, was $1.16, compared to $1.08 for the same period in 2003. Catellus Development Corporation will host a conference call on Thursday, November 4 at 9:00 a.m. Pacific Time (10:00 a.m. Mountain, 11:00 a.m. Central, and Noon Eastern) to discuss third quarter results. Catellus will release financial results for the third quarter on Wednesday, November 3, 2004, after the close of the day's trading on the New York Stock Exchange. To participate in the conference call, free of charge, dial 800-510-0219 (domestic) or 617-614-3451 (international) and enter access code 84518863 prior to the beginning of the call. Access the live webcast of the conference call from the Investor Relations section of Catellus' website at http://www.catellus.com/. You may also access the live webcast through http://www.streetevents.com/. The telephonic replay will be available until 2:00 p.m. Eastern Time on November 18, 2004, at 888-286-8010 (domestic) or 617-801-6888 (international) with the access code 91468081. The webcast replay will be available through November 4, 2005, from the Investor Relations section of Catellus' website at http://www.catellus.com/ or at http://www.streetevents.com/. The third quarter 2004 Supplemental Financial Package will be available from the Home Page and the Investor Relations section of our website at http://www.catellus.com/. These materials are also available by contacting Investor Relations at 415-974-4500 or by sending an email to . Catellus Development Corporation is a publicly traded real estate development company that began operating as a real estate investment trust effective January 1, 2004. The company owns and operates approximately 40.7 million square feet of predominantly industrial property in many of the country's major distribution centers and transportation corridors. Catellus' principal objective is sustainable, long-term growth in earnings, which it seeks to achieve by applying its strategic resources: a lower-risk/higher- return rental portfolio, a focus on expanding that portfolio through development, and the deployment of its proven land development skills to select opportunities where it can generate profits to recycle back into its business. More information on the company is available at http://www.catellus.com/. Except for historical matters, the matters discussed in this release are forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements about plans, opportunities, and development. We caution you not to place undue reliance on these forward-looking statements, which reflect our current beliefs and are based on information currently available to us. We do not undertake any obligation to publicly revise these forward-looking statements to reflect future events or changes in circumstances, except as may be required by law. These forward-looking statements are subject to risks and uncertainties that could cause our actual results, performance, or achievements to differ materially from those expressed in or implied by these statements. In particular, among the factors that could cause actual results to differ materially are: changes in the real estate market or in general economic conditions, including a worsening economic slowdown or recession; non-renewal of leases by tenants or renewal at lower than expected rates; difficulties in identifying properties to acquire and in effecting acquisitions on advantageous terms and the failure of acquisitions to perform as we expect; our failure to divest of properties on advantageous terms or to timely reinvest proceeds from any such divestitures; our failure to qualify and maintain our status as a real estate investment trust under the Internal Revenue Code of 1986; product and geographical concentration; industry competition; availability of financing and changes in interest rates and capital markets; changes in insurance markets; losses in excess of our insurance coverage; discretionary government decisions affecting the use of land, including the issuance of permits, and delays resulting therefrom; changes in the management team; weather conditions and other natural occurrences that may affect construction or cause damage to assets; changes in income taxes or tax laws; environmental uncertainties, including liability for environmental remediation and changes in environmental laws and regulations; failure or inability of third parties to fulfill their commitments or to perform their obligations under agreements; failure of parties to reach agreement on definitive terms or to close transactions; increases in the cost of land and construction materials and availability of properties for future development; limitations on, or challenges to, title to our properties; risks related to the financial strength of joint venture projects and co-owners; changes in policies and practices of organized labor groups; shortages or increased costs of electrical power; risks and uncertainties affecting property development and renovation (including construction delays and cost overruns); other risks inherent in the real estate business; and acts of war, other geopolitical events and terrorists activities that could adversely affect any of the above factors. For further information, including more detailed risk factors, you should refer to Catellus Development Corporation's annual report on Form 10-K for the fiscal year ended December 31, 2003, and its report on Form 10-Q for the quarter ended June 30, 2004, filed with the Securities and Exchange Commission. Contact: Margan Mitchell Catellus Development Corporation 415-974-4616 CATELLUS DEVELOPMENT CORPORATION CONSOLIDATED BALANCE SHEET (In thousands) (Unaudited) September 30, December 31, 2004 2003 -------------- ------------- Assets Properties $2,635,367 $2,498,015 Less accumulated depreciation (486,288) (446,872) -------------- ------------- 2,149,079 2,051,143 Other assets and deferred charges, net 270,065 292,312 Notes receivable, less allowance 84,519 119,202 Accounts receivable, less allowance 21,857 19,752 Assets held for sale 6,778 2,352 Restricted cash and investments 12,646 64,617 Cash and cash equivalents 23,855 45,931 -------------- ------------- Total $2,568,799 $2,595,309 ============== ============= Liabilities and stockholders' equity Mortgage and other debt $1,353,941 $1,378,054 Accounts payable and accrued expenses 125,668 157,036 Deferred credits and other liabilities 300,867 291,530 Liabilities associated with assets held for sale 72 2,296 Deferred income taxes 50,461 56,712 -------------- ------------- Total liabilities 1,831,009 1,885,628 -------------- ------------- Stockholders' equity Common stock -- 104,339 and 103,822 shares issued, and 103,039 and 102,724 shares outstanding at September 30, 2004 and December 31, 2003, respectively 1,043 1,039 Paid-in capital 500,578 489,143 Unearned value of restricted stock and restricted stock units (1,300 and 1,098 shares at September 30, 2004 and December 31, 2003, respectively) (19,845) (22,720) Accumulated earnings 256,014 242,219 -------------- ------------- Total stockholders' equity 737,790 709,681 -------------- ------------- Total $2,568,799 $2,595,309 ============== ============= CATELLUS DEVELOPMENT CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2004 2003 2004 2003 -------- ------- -------- -------- Revenue Rental revenue $76,548 $74,079 $229,373 $219,907 Sales revenue 39,487 45,515 84,477 78,425 Management, development and other fees 394 2,954 2,851 9,901 -------- ------- -------- -------- 116,429 122,548 316,701 308,233 -------- ------- -------- -------- Costs and expenses Property operating costs (21,775) (22,760) (63,037) (61,568) Cost of sales (23,144) (27,171) (51,108) (50,424) Selling, general and administrative expenses (13,619) (15,365) (39,181) (35,423) Depreciation and amortization (20,344) (17,721) (56,980) (51,311) -------- ------- -------- -------- (78,882) (83,017) (210,306) (198,726) -------- ------- -------- -------- Operating income 37,547 39,531 106,395 109,507 -------- ------- -------- -------- Other income Equity in (losses) earnings of operating joint ventures, net (802) 540 3,991 5,199 Equity in earnings of development joint ventures, net 1,204 7,553 5,822 16,834 Gain on non-strategic asset sales -- 928 16,441 8,285 Interest income 2,143 1,745 7,381 5,458 Other 1,166 581 2,423 2,530 -------- ------- -------- -------- 3,711 11,347 36,058 38,306 -------- ------- -------- -------- Other expenses Interest expense (15,763) (15,583) (47,821) (48,778) REIT transition costs -- (1,416) (420) (4,779) Other (1,693) (411) (3,942) (607) -------- ------- -------- -------- (17,456) (17,410) (52,183) (54,164) -------- ------- -------- -------- Income before income taxes and discontinued operations 23,802 33,468 90,270 93,649 Income tax expense (5,905) (12,456) (7,818) (34,842) -------- ------- -------- -------- Income from continuing operations 17,897 21,012 82,452 58,807 -------- ------- -------- -------- Discontinued operations, net of income tax: Gain (loss) from disposal of discontinued operations 11,617 (201) 13,631 4,218 Income from discontinued operations 299 138 1,155 589 -------- ------- -------- -------- Net gain (loss) from discontinued operations 11,916 (63) 14,786 4,807 -------- ------- -------- -------- Net income $29,813 $20,949 $97,238 $63,614 -------- ------- -------- -------- Income per share from continuing operations Basic $0.17 $0.21 $0.80 $0.59 -------- ------- -------- -------- Assuming dilution $0.17 $0.20 $0.79 $0.58 -------- ------- -------- -------- Income per share from discontinued operations Basic $0.12 $-- $0.14 $0.05 -------- ------- -------- -------- Assuming dilution $0.12 $-- $0.14 $0.05 -------- ------- -------- -------- Net income per share Basic $0.29 $0.21 $0.94 $0.64 -------- ------- -------- -------- Assuming dilution $0.29 $0.20 $0.93 $0.63 -------- ------- -------- -------- Average number of common shares outstanding -- basic 103,053 100,879 102,974 99,064 -------- ------- -------- -------- Average number of common shares outstanding -- diluted 104,424 102,994 104,272 101,737 -------- ------- -------- -------- Dividends declared per share $0.27 $-- $0.81 $-- -------- ------- -------- -------- CATELLUS DEVELOPMENT CORPORATION Reconciliation of Net Income to Funds from Operations (In thousands, except per share data) (Unaudited) Three Months ended September 30, 2004 ------------------------------- Urban/Res. Core & Other Segment Segment Consolidated ------- ------- ------------ Net income $24,691 $5,122 $29,813 Add depreciation 21,099 174 21,273 Less gain on rental property sales (11,656) -- (11,656) ------- ------- ------------ FFO $34,134 $5,296 $39,430 ======= ======= ============ FFO per share: Basic $0.33 $0.05 $0.38 ======= ======= ============ Assuming dilution $0.33 $0.05 $0.38 ======= ======= ============ Average number of common shares outstanding-basic 103,053 103,053 103,053 ======= ======= ============ Average number of common shares outstanding-diluted 104,424 104,424 104,424 ======= ======= ============ Three Months ended September 30, 2003 ------------------------------- Urban/Res. Core & Other Segment Segment Consolidated ------- ------- ------------ Net income $8,843 $12,106 $20,949 Add depreciation 18,091 429 18,520 Add loss on rental property sales 301 -- 301 ------- ------- ------------ FFO 27,235 12,535 39,770 Hypothetical tax savings 5,452 -- 5,452 ------- ------- ------------ FFO as adjusted for hypothetical tax savings $32,687 $12,535 $45,222 ======= ======= ============ FFO as adjusted for hypothetical tax savings per share: Basic $0.32 $0.13 $0.45 ======= ======= ============ Assuming dilution $0.32 $0.12 $0.44 ======= ======= ============ Average number of common shares outstanding-basic 100,879 100,879 100,879 ======= ======= ============ Average number of common shares outstanding-diluted 102,994 102,994 102,994 ======= ======= ============ CATELLUS DEVELOPMENT CORPORATION Reconciliation of Net Income to Funds from Operations (In thousands, except per share data) (Unaudited) Nine Months ended September 30, 2004 ------------------------------- Urban/Res. Core & Other Segment Segment Consolidated ------- -------- ------------ Net income $77,638 $19,600 $97,238 Add depreciation 58,981 539 59,520 Less gain on rental property sales (16,023) -- (16,023) ------- -------- ------------ FFO $120,596 $20,139 $140,735 ======== ======== ============ FFO per share: Basic $1.17 $0.20 $1.37 ======== ======== ============ Assuming dilution $1.16 $0.19 $1.35 ======== ======== ============ Average number of common shares outstanding-basic 102,974 102,974 102,974 ======== ======== ============ Average number of common shares outstanding-diluted 104,272 104,272 104,272 ======== ======== ============ Nine Months ended September 30, 2003 ------------------------------- Urban/Res. Core & Other Segment Segment Consolidated ------- -------- ------------ Net income $42,239 $21,375 $63,614 Add depreciation 52,004 429 52,433 Less gain on rental property sales (7,152) -- (7,152) ------- -------- ------------ FFO 87,091 21,804 108,895 Hypothetical tax savings 22,558 -- 22,558 ------- -------- ------------ FFO as adjusted for hypothetical tax savings $109,649 $21,804 $131,453 ======== ======== ============ FFO as adjusted for hypothetical tax savings per share: Basic $1.11 $0.22 $1.33 ======== ======== ============ Assuming dilution $1.08 $0.21 $1.29 ======== ======== ============ Average number of common shares outstanding-basic 99,064 99,064 99,064 ======== ======== ============ Average number of common shares outstanding-diluted 101,737 101,737 101,737 ======== ======== ============ CATELLUS DEVELOPMENT CORPORATION (In thousands and unaudited) Rental revenue less property operating costs (including the portion from discontinued operations) includes equity in earnings of operating joint ventures, net (as reflected in the accompanying statements of operations). Rental revenue less property operating costs is commonly used by stockholders, company management and industry analysts as a measurement of operating performance of the company's rental portfolio and is calculated as follows: Three Months ended Nine Months ended September 30, September 30, ------------------ ----------------- 2004 2003 2004 2003 ------- ------- -------- -------- Rental revenue $76,548 $74,079 $229,373 $219,907 Property operating costs (21,775) (22,760) (63,037) (61,568) Equity in (losses) earnings of operating joint ventures, net (802) 540 3,991 5,199 Rental revenue from discontinued operations 995 1,258 3,346 4,613 Property operating costs from discontinued operations (239) (342) (676) (1,314) ------- ------- -------- -------- Rental revenue less property operating costs ("net operating income") $54,727 $52,775 $172,997 $166,837 ======= ======= ======== ======== DATASOURCE: Catellus Development Corporation CONTACT: Margan Mitchell of Catellus Development Corporation, +1-415-974-4616 Web site: http://www.catellus.com/

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