<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1997 Commission file number 0-18694
CATELLUS DEVELOPMENT
CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-2953477
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
201 MISSION STREET
SAN FRANCISCO, CALIFORNIA 94105
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(415) 974-4500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
As of July 28, 1997, there were 106,345,567 issued and outstanding shares
of the registrant's common stock, $.01 par value per share.
================================================================================
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet as of June 30, 1997 and December 31, 1996............ 2
Consolidated Statement of Operations for the three months and six months ended
June 30, 1997 and 1996......................................................... 3
Consolidated Statement of Cash Flows for the six months ended
June 30, 1997 and 1996......................................................... 4
Notes to Consolidated Financial Statements...................................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................... 8
PART II. OTHER INFORMATION................................................................... 21
SIGNATURES.................................................................................... 22
</TABLE>
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
<TABLE>
<CAPTION>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
June 30, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Properties............................................... $ 1,287,613 $ 1,235,440
Less accumulated depreciation............................ (222,278) (211,338)
------------ ------------
1,065,335 1,024,102
Other assets and deferred charges...................... 50,284 50,547
Notes receivable....................................... 8,461 11,924
Accounts receivable, less allowance................... 11,659 12,965
Restricted cash........................................ 11,902 --
Cash and cash equivalents.............................. 18,608 23,580
------------ ------------
Total................................... $ 1,166,249 $ 1,123,118
============ ============
Liabilities and stockholders' equitY
Mortgage and other debt................................ $ 541,463 $ 496,742
Accounts payable and accrued expenses.................. 41,760 54,178
Deferred credits and other liabilities................. 35,949 43,007
Deferred income taxes.................................. 113,016 106,738
------------ ------------
Total liabilities....................... 732,188 700,665
------------ ------------
Commitments and contingencies (Note 7)
Stockholders' equity
Preferred stock........................................ -- 274,428
Common stock - 106,332,238 and 77,028,099 shares issued
at June 30, 1997 and December 31, 1996.......... 1,063 770
Paid-in capital........................................ 472,658 197,709
Accumulated deficit.................................... (39,660) (50,454)
------------ ------------
Total stockholders' equity.............. 434,061 422,453
------------ ------------
Total................................... $ 1,166,249 $ 1,123,118
============ ============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
===================== ====================
1997 1996 1997 1996
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Income producing properties
Rental revenue.............................................. $ 31,421 $ 29,380 $ 62,226 $ 57,414
Property operating costs.................................... (10,045) (9,928) (19,101) (18,915)
Equity in earnings of joint ventures........................ 2,884 1,819 4,867 3,292
--------- -------- --------- ---------
24,260 21,271 47,992 41,791
--------- -------- --------- ---------
Development activities and fee services
Gain on development property sales.......................... 3,154 6,568 3,638 6,568
Development and management fee income, net.................. 1,435 410 2,154 813
Equity in earnings of joint ventures........................ 1,167 37 1,225 (46)
Land holding costs, net..................................... (169) (745) (342) (1,805)
--------- -------- --------- ---------
5,587 6,270 6,675 5,530
--------- -------- --------- ---------
Interest expense................................................ (10,205) (10,841) (19,999) (21,780)
Depreciation and amortization................................... (7,723) (7,432) (15,199) (15,104)
General and administrative expense.............................. (2,701) (1,997) (5,316) (4,057)
Gain on non-strategic land and other property sales............. 418 7,358 4,058 10,445
Litigation and environmental costs, net -- -- 42 900
Other, net...................................................... (45) 265 (45) 64
--------- -------- --------- ---------
Earnings before income taxes.................................... 9,591 14,894 18,208 17,789
Income tax expense.............................................. (3,906) (6,077) (7,414) (7,258)
--------- -------- --------- ---------
Net earnings................................................ 5,685 8,817 10,794 10,531
Preferred stock dividends -- (5,953) (1,353) (11,906)
-------- -------- --------- ---------
Net earnings(loss) applicable to common stockholders........ $ 5,685 $ 2,864 $ 9,441 $ (1,375)
======== ======== ========= =========
Net earnings (loss) per share of common stock............... $ 0.06 $ 0.04 $ 0.10 $ (0.02)
======== ======== ========= =========
Average number of common shares outstanding................. 100,327 74,501 91,493 73,877
======== ======== ========= =========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Six Months Ended
June 30,
-------------------------
1997 1996
---------- ----------
Cash flows from operating activities: (Unaudited)
<S> <C> <C>
Net earnings....................................................... $ 10,794 $ 10,531
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization................................. 15,199 15,104
Deferred income taxes......................................... 6,278 6,953
Amortization of deferred loan fees and other costs............ 1,536 1,635
Equity in earnings of joint ventures.......................... (6,092) (3,246)
Operating distributions from joint ventures................... 4,895 3,704
Cost of development properties sold........................... 23,429 13,913
Cost of non-strategic land sold............................... 2,601 11,329
Gain on sales of other property............................... (1,600) (4,706)
Expenditures for development properties....................... (20,806) (6,663)
Other, net.................................................... 1,839 2,386
Change in operating assets and liabilities.................... (1,344) (2,803)
---------- ----------
Net cash provided by operating activities............................... 36,729 48,137
---------- ----------
Cash flows from investing activities:
Capital expenditures.................................................. (54,951) (19,939)
Tenant improvements................................................... (3,737) (2,163)
Net proceeds from sale of other property.............................. 2,623 7,459
Contributions to joint ventures....................................... (11,295) --
Restricted cash for future investment................................. (11,902) --
---------- ----------
Net cash used in investing activities................................... (79,262) (14,643)
---------- ----------
Cash flows from financing activities:
Borrowings............................................................ 72,128 13,655
Repayment of borrowings............................................... (26,548) (45,141)
Dividends paid........................................................ (5,975) (11,906)
Redemption of preferred stock......................................... (471) --
Distributions to minority partners.................................... (3,771) --
Proceeds from issuance of common stock................................ 2,198 46
---------- ----------
Net cash provided by (used in) financing activities..................... 37,561 (43,346)
----------- ----------
Net decrease in cash and cash equivalents (4,972) (9,852)
Cash and cash equivalents at beginning of period........................ 23,580 27,743
---------- ----------
Cash and cash equivalents at end of period.............................. $ 18,608 $ 17,891
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized).............................. $ 18,379 $ 20,324
Income taxes...................................................... $ 647 $ 355
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
NOTE 1. DESCRIPTION OF BUSINESS
Catellus Development Corporation (the Company) is a diversified real
estate operating company that manages and develops real estate for its own
account and others. The Company's portfolio of industrial, residential, retail
and office projects, undeveloped land, and joint venture interests are located
in major markets in California and 10 other states.
NOTE 2. INTERIM FINANCIAL DATA
The accompanying consolidated financial statements should be read in
conjunction with the Company's 1996 Annual Report on Form 10-K as filed with the
Securities and Exchange Commission. In the opinion of management, the
accompanying financial information includes all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
position, results of operations and cash flows for the interim periods
presented. Certain prior period financial data has been reclassified to conform
with the current period presentation.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (Statement 128).
Statement 128 is effective for financial statements issued after December 15,
1997 and simplifies the current standards for computing earnings per share. The
Company anticipates that adoption of Statement 128 will not result in
disclosures that are materially different than those contained in this quarterly
report. The Company plans to adopt Statement 128 in the fourth quarter of
1997.
During June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income", and No. 131, "Segment Reporting". Both standards are effective for
fiscal years beginning after December 15, 1997. The Company plans to adopt these
standards in the first quarter of 1998 and does not expect that they will have a
material effect on its financial position or results of operations.
NOTE 3. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
The Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents. Restricted
cash at June 30, 1997 represents proceeds from a June 1997 development property
sale. The restricted cash is being held in a separate cash account at a title
company in order to preserve the Company's options of reinvesting the proceeds
on a tax deferred basis.
NOTE 4. EARNINGS PER SHARE
Net earnings (loss) per share of common stock is computed by dividing net
earnings (loss), after reduction for preferred stock dividends, by the weighted
average number of shares of common stock equivalents outstanding during the
period. Fully diluted earnings per share amounts have not been presented because
assumed conversion of the Series A and Series B preferred stock would be anti-
dilutive for all relevant periods. Net earnings per share of common stock would
have been $0.05 and $0.10 for the three and six month periods ended June 30,
1997 had the conversions discussed in Note 8 occurred at the beginning of each
period.
5
<PAGE>
NOTE 5. MORTGAGE AND OTHER DEBT
Mortgage and other debt at June 30, 1997 and December 31, 1996 is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ -------------
<S> <C> <C>
First mortgage loan - Prudential............................................... $ 254,690 $ 259,063
Secured revolving credit line.................................................. 160,100 118,600
First mortgage loans........................................................... 66,563 67,249
Residential construction loans................................................. 22,624 10,105
Assessment district bonds...................................................... 19,854 21,012
Term loan - secured............................................................ 9,000 9,000
Construction loans - secured................................................... 7,612 5,028
Secured promissory note........................................................ - 6,160
Other loans.................................................................... 1,020 525
------------ -------------
Total mortgage and other debt............................................... $ 541,463 $ 496,742
============ =============
Due in one year................................................................ $ 40,046 $ 24,221
============ =============
</TABLE>
Interest costs relating to mortgage and other debt for the three and six
month periods ended June 30, 1997 and 1996 are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- -------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Total interest incurred...................... $ 11,331 $ 11,140 $ 22,605 $ 22,344
Interest capitalized......................... (1,126) (299) (2,606) (564)
------------ ------------ -------------- -------------
Interest expensed....................... $ 10,205 $ 10,841 $ 19,999 $ 21,780
============ ============ ============== =============
</TABLE>
NOTE 6. PROPERTIES
Net book value by property type at June 30, 1997 and December 31, 1996
consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Income-producing properties:
Industrial buildings............................................................. $ 314,822 $ 291,608
Office buildings................................................................. 105,498 108,184
Retail buildings................................................................. 83,315 86,070
Land development................................................................. 335,534 323,134
Land leases...................................................................... 8,309 6,627
----------- ------------
847,478 815,623
----------- ------------
Land holdings:
Developable properties........................................................... 198,292 200,624
Natural resources................................................................ 2,992 2,299
Properties held for sale......................................................... 35,373 37,223
----------- ------------
236,657 240,146
----------- ------------
Other (including proportionate share of joint venture's
net deficits of $29,321 and $41,058)............................................ (18,800) (31,667)
----------- ------------
$ 1,065,335 $ 1,024,102
=========== ============
</TABLE>
6
<PAGE>
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company is a party to a number of legal actions arising in the ordinary
course of business. While the Company cannot predict with certainty the final
outcome of these proceedings, management believes that none of these actions,
when finally resolved, will have a material adverse effect on the consolidated
financial position, results of operations, or cash flows of the Company.
Inherent in the operations of the real estate business is the possibility
that environmental liability may arise from the ownership, or previous
ownership, of real properties owned. The Company may be required in the future
to take action to correct or reduce the environmental effects of prior disposal
or release of hazardous substances by third parties, the Company, or its
corporate predecessors. Future environmental costs are difficult to estimate
because of such factors as the unknown magnitude of possible contamination, the
unknown timing and extent of the corrective actions which may be required, the
determination of the Company's liability in proportion to that of responsible
parties, and the extent to which such costs are recoverable from insurance.
At June 30, 1997, management estimates that future costs for remediation of
identified or suspected environmental contamination on operating properties and
properties previously sold approximate $13.2 million, and has provided a reserve
for that amount. It is anticipated that such costs will be incurred over the
next ten years with a substantial portion incurred over the next five years.
Management also estimates that similar costs relating to the Company's
properties to be developed or sold may range from $12.6 million to $38.6
million. These amounts will be capitalized as components of development costs
when incurred, which is anticipated to be over a period of twenty years, or will
be deferred and charged to cost of sales when the properties are sold. The
Company's estimates were developed based on extensive reviews which took place
over several years based upon then prevailing law and identified site
conditions. Because of the breadth of its portfolio, the Company is unable to
review each property extensively on a regular basis. Also, such estimates are
not precise and are always subject to the availability of further information
about the prevailing conditions at the site, the future requirements of
regulatory agencies and the availability of other parties to pay some or all of
such costs.
NOTE 8. PREFERRED STOCK CONVERSION/REDEMPTION
In December 1996, the Company called for redemption of approximately $25
million of its $3.75 Series A Cumulative Convertible Preferred Stock (Series A
Preferred Stock). In January 1997, of the 475,000 preferred shares called,
471,730 shares were converted into 2,603,168 common shares and 3,270 shares were
redeemed at $52.625 per share plus accrued and unpaid dividends at a cost of
approximately $175,000.
On February 5, 1997, the Company called for redemption of approximately $90
million of its Series A Preferred Stock. In March 1997, of the 1,720,000
preferred shares called, 1,715,837 shares were converted into 9,469,015 common
shares and the remaining shares were redeemed at $52.25 per share plus accrued
and unpaid dividends at a cost of approximately $220,000.
On March 24, 1997, the Company called for redemption of the remaining
outstanding 250,000 shares, or approximately $13 million, of its Series A
Preferred Stock and 1,470,000 shares, or approximately $75 million, of its
$3.625 Series B Cumulative Convertible Exchangeable Preferred Stock (Series B
Preferred Stock). In May 1997, 99.7% of the Series A Preferred Stock shares were
converted into 1,376,742 shares of common stock and the remaining shares were
redeemed at $52.25 per share plus accrued and unpaid dividends at a cost of
approximately $45,000; additionally, the Series B Preferred Stock
shares were converted into approximately 7,500,000 shares of common stock.
On May 1, 1997, the Company called for redemption of the remaining
outstanding 1,521,000 shares, or approximately $80 million, of its Series B
Preferred Stock. In June 1997, all of the remaining Series B Preferred Stock
shares were converted into 7,758,201 shares of common stock.
With the completion of the May 1, 1997 call, the Company has no remaining
outstanding preferred stock.
7
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the Company's 1996 Form 10-K.
Results of Operations
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Income-Producing Properties
- ---------------------------
Rental revenue and property operating costs for the Company's income-
producing properties are summarized below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------------------
1997 1996 DIFFERENCE
---------- ----------- -------------
<S> <C> <C> <C>
(in thousands)
REVENUES
----------------------------------------
Industrial buildings.......................................... $ 31,841 $ 27,092 $ 4,749
Office buildings.............................................. 14,142 14,505 (363)
Retail buildings.............................................. 6,656 6,763 (107)
Land development.............................................. 5,630 5,030 600
Land leases................................................... 3,957 4,024 (67)
--------- ---------- -----------
$ 62,226 $ 57,414 $ 4,812
========= ========== ===========
PROPERTY OPERATING COSTS
----------------------------------------
Industrial buildings.......................................... $ 7,019 $ 6,649 $ 370
Office buildings.............................................. 6,139 5,883 256
Retail buildings.............................................. 1,925 2,308 (383)
Land development.............................................. 3,558 3,462 96
Land leases................................................... 460 613 (153)
--------- ---------- ----------
$ 19,101 $ 18,915 $ 186
========= ========== ==========
</TABLE>
8
<PAGE>
Building square footage owned, leased and percentage of occupancy data are
as follows:
<TABLE>
<CAPTION>
JUNE 30,
----------------------------------------
1997 1996
-------------- ------------
(in thousands, except percentages)
<S> <C> <C>
Industrial buildings
Square feet owned................................................. 13,361 11,625
Square feet leased................................................ 12,958 11,288
Percent leased.................................................... 97.0% 97.1%
Office buildings
Square feet owned................................................. 1,619 1,682
Square feet leased................................................ 1,439 1,532
Percent leased.................................................... 88.9% 91.1%
Retail buildings
Square feet owned................................................. 928 928
Square feet leased................................................ 829 868
Percent leased.................................................... 89.3% 93.5%
Land development
Square feet owned................................................. 1,230 1,240
Square feet leased................................................ 1,177 1,093
Percent leased.................................................... 95.7% 88.1%
Total
Square feet owned................................................. 17,138 15,475
Square feet leased................................................ 16,403 14,781
Percent leased.................................................... 95.7% 95.5%
</TABLE>
The increase in revenue from industrial buildings is primarily attributable
to the addition of eleven new buildings totaling approximately 1.9 million
square feet that were added to the portfolio since July 1996. Approximately
$3.5 million of the increase was attributable to base rents for the new
buildings, approximately $.5 million was attributable to higher tenant pass-
through charges associated with the new construction and approximately $0.7
million was a result of increases in rental rates and tenant pass-through
charges under existing leases. Property operating costs for the industrial
portfolio increased by approximately $.4 million primarily because of the
increase in property taxes associated with both the new buildings and existing
properties.
Rental revenue for the Company's office portfolio declined by $.4 million
in 1997, compared to 1996, primarily because of a slight decline in occupancy.
The decline in occupancy was partially offset by higher rental rates in 1997.
Operating costs for office buildings increased primarily as a result of
increased utility costs and increased property taxes.
Rental revenue for the Company's retail portfolio decreased approximately
$.1 million in 1997 primarily as a result of a decrease in occupancy and a
decline in other revenues. The decrease in property operating costs for the
retail buildings was primarily due to a reduction in property tax assessments.
The increase in revenue and costs from land development resulted from
higher occupancies at these properties.
9
<PAGE>
The decrease in revenues and expenses from land leases between 1996 and
1997 is primarily attributable to the sale of a land lease in mid-1996.
Income-producing joint venture earnings increased by $1.6 million because
of higher occupancies and room rates in certain hotel joint ventures and higher
occupancy and lower interest expenses for an apartment building joint venture.
Development Activities and Fee Services
- ---------------------------------------
Gain on development property sales decreased in 1997, compared to 1996, as
a result of the higher cost basis and resulting lower profit margin of the
properties sold in the first six months of 1997 (see further comments regarding
gross margins in Variability in Results on page 16).
The activity in the Company's sales of development property is summarized
as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------
1997 1996 DIFFERENCE
------------- ------------ --------------
(in thousands)
<S> <C> <C> <C>
Commercial sales:
Sales....................................................................... $ 15,516 $ 20,678 $ (5,162)
Cost of sales............................................................... 13,010 14,110 (1,100)
--------- --------- ---------
Gain................................................................ 2,506 6,568 (4,062)
--------- --------- ---------
Residential Sales:
Sales....................................................................... 18,417 -- 18,417
Cost of sales............................................................... 17,285 -- 17,285
--------- --------- ---------
Gain................................................................ 1,132 -- 1,132
--------- --------- ---------
TOTAL GAIN ON DEVELOPMENT PROPERTY SALES.................................... $ 3,638 $ 6,568 $ (2,930)
========= ========= =========
</TABLE>
The gain from commercial sales in 1997 reflects the $12 million sale of a
279,000-square-foot industrial building in La Mirada, California. The gain from
commercial sales in 1996 reflects the $13.2 million sale of a four-acre parcel
at Los Angeles Union Station to the Metropolitan Water District.
Residential sales in 1997 are from the Catellus Residential Group ("CRG").
There were no residential sales for the six months ended June 30, 1996.
10
<PAGE>
Following is a summary of development property sales under contract but not
closed:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------------- --------------
(in thousands)
<S> <C> <C>
Commercial.................................................................. $ 2,741 $ --
========== ==========
Residential (lot and unit sales)
Joint venture projects (A)(1) ....................................... $ 30,952 $ 21,901
========== =========
Management projects (A)(2)........................................... $ 22,325 $ 10,878
========== =========
(A) The amounts shown are 100% of the gross sales price.
(1) The Company is entitled to receive 50% of the net profits from these joint
ventures.
(2) The Company receives a fee based on the sales of these units, which
averages 5% of revenues.
</TABLE>
Development and management fee income, net increased by $1.3 million in 1997
compared to 1996. This increase was primarily from an increase in management
fees from the management contracts signed in January 1996 and higher development
fees from the construction project at Los Angeles Union Station that began in
June 1996, partially offset by lower residential joint venture management fees.
Equity in earnings of development joint ventures increased by $1.3 million in
1997 compared to 1996. The increase is primarily attributable to the joint
venture earnings from CRG, which was acquired in March 1996, and a property sale
from another joint venture.
The reduction in losses from land holding costs, net between 1997 and 1996 is
primarily attributable to sales of properties, a reduction in property taxes of
"for sale properties" and property tax refunds.
Other Items on the Statement of Operations
- ------------------------------------------
Interest expense was $1.8 million lower in 1997 primarily as a result of an
increase in capitalized interest related to higher development activity in 1997
and lower mortgage debt.
Following is a summary of interest costs:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------------------
1997 1996 Difference
----------- ----------- ------------
(in thousands)
<S> <C> <C> <C>
Total interest costs............................................. $22,605 $22,344 $ 261
Interest capitalized............................................. (2,606) (564) (2,042)
------- ------- -------
Interest expensed................................................ 19,999 21,780 (1,781)
Interest income.................................................. (406) (765) 359
------- ------- -------
$19,593 $21,015 $(1,422)
======= ======= ========
</TABLE>
General and administrative expense increased by $1.3 million in 1997, compared
to 1996, primarily because of higher staffing levels associated with increased
operating and development activities.
11
<PAGE>
The decrease from 1996 to 1997 in the Company's gain on sales of non-
strategic land and other property is summarized as follows (see further comments
regarding gross margin in Variability in Results section on page 16):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------------------------
1997 1996 DIFFERENCE
----------- ---------- ------------
(in thousands)
<S> <C> <C> <C>
Sales......................................................... $9,265 $30,366 $(21,101)
Cost of sales................................................. 5,207 19,921 (14,714)
------- ------- --------
Gain..................................................... $4,058 $10,445 $ (6,387)
====== ======= ========
</TABLE>
Following is a summary of non-strategic land and other property sales under
contract but not closed:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ -----------
(in thousands)
<S> <C> <C>
Non-strategic land and other property................................. $36,184 $6,090
======= ======
.
</TABLE>
In October 1995, the Company announced a goal of selling $200 million of non-
strategic land assets by March 1998, including $100 million by December 31,
1996. The Company sold $123.7 million of such assets through December 31, 1996.
In addition, during 1996, the Company determined that approximately $30 million
of assets had residential and other development potential and, therefore,
reduced the goal of $200 million to $170 million. Including the year-to-date
sales of $9.3 million through June 30, 1997, the Company expects the remaining
$37 million of non-strategic land assets to be sold during 1997 and 1998. The
level of sales in 1997 is expected to be much lower than 1996.
Litigation and environmental costs, net decreased $.9 million between 1997 and
1996 primarily because of proceeds from the settlement of litigation in an
environmental matter in favor of the Company in 1996. No similar recoveries were
made in 1997.
Preferred Stock Dividends
- -------------------------
Payments of preferred stock dividends declined by $10.6 million between 1997
and 1996 as a result of the redemption or conversion of all preferred stock as
further discussed on page 15.
12
<PAGE>
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1997 AND 1996
Income-Producing Properties
- ---------------------------
Rental revenue and property operating costs for the Company's income-producing
properties are summarized below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------------------------------------------------
1997 1996 DIFFERENCE
-------------------- -------------------- ------------------
(in thousands)
REVENUES
---------------------------------------------------------------------
<S> <C> <C> <C>
Industrial buildings................................. $16,250 $13,773 $2,477
Office buildings..................................... 7,067 7,303 (236)
Retail buildings..................................... 3,201 3,653 (452)
Land development..................................... 2,862 2,576 286
Land leases.......................................... 2,041 2,075 (34)
------- ------- ------
$31,421 $29,380 $2,041
======= ======= ======
PROPERTY OPERATING COSTS
---------------------------------------------------------------------
Industrial buildings................................... $ 3,752 $ 3,567 $ 185
Office buildings....................................... 3,260 3,031 229
Retail buildings....................................... 969 1,289 (320)
Land development....................................... 1,838 1,801 37
Land leases............................................ 226 240 (14)
------- ------- -----
$10,045 $ 9,928 $ 117
======= ======= =====
</TABLE>
The increase in revenue from industrial buildings is primarily attributable
to the addition of eleven new buildings totaling approximately 1.9 million
square feet that were added to the portfolio since July 1996. Approximately
$2.0 million of the increase was attributable to base rents for the new
buildings, approximately $.3 million was attributable to higher tenant pass-
through charges associated with the new construction and higher operating costs,
and approximately $.2 million was the result of net increases in rental rates
and tenant pass-through charges under existing leases. Property operating costs
for the industrial portfolio increased by approximately $.2 million primarily
because of the increase in property taxes associated with the new buildings.
Rental revenue for the Company's office portfolio declined in 1997,
compared to 1996, primarily because of a decline in occupancy. The decline in
occupancy was partially offset by higher rental rates in the second quarter of
1997. Operating costs for office buildings increased primarily as a result of
higher utility and maintenance expenses in 1997.
Rental revenue for the Company's retail portfolio decreased approximately $.5
million because of a decrease in occupancy. The decrease in property operating
costs for the retail buildings was primarily due to lower property assessments
in 1997 compared to 1996.
The increase in revenue from land development properties resulted from higher
occupancies in 1997.
The decrease in revenues and expenses from land leases between 1996 and 1997
is primarily because of the sale of a land lease in mid-1996.
13
<PAGE>
Income-producing joint venture earnings increased by $1.1 million because of
higher occupancies and room rates for certain hotel joint ventures and higher
occupancy and lower interest expenses for an apartment building joint venture.
Development Activities and Fee Services
- ---------------------------------------
The decrease in gain on development property sales in 1997, compared to 1996,
is attributable to the higher cost basis and resulting lower profit margin of
properties sold in the second quarter of 1997 (see further comments regarding
gross margin in Variability in Results section on page 16).
The activity in the Company's sales of development property is summarized
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
------------------------------------------------------------
1997 1996 DIFFERENCE
------------------- -------------- -------------------
<S> <C> <C> <C>
(in thousands)
COMMERCIAL SALES:
Sales.................................................................. $14,311 $ 20,678 $(6,367)
Cost of sales.......................................................... 12,445 14,110 (1,665)
------- -------- -------
Gain................................................................. 1,866 6,568 (4,702)
------- -------- -------
RESIDENTIAL SALES:
Sales.................................................................. 15,970 -- 15,970
Cost of sales.......................................................... 14,682 -- 14,682
------- -------- -------
Gain................................................................. 1,288 -- 1,288
------- -------- -------
TOTAL GAIN ON DEVELOPMENT PROPERTY SALES............................... $ 3,154 $ 6,568 $(3,414)
======= ======== =======
</TABLE>
The gain from commercial sales in 1997 reflects the $12 million sale of a
279,000-square-foot industrial building in La Mirada, California. The gain from
commercial sales in 1996 reflects the $13.2 million sale of a four-acre parcel
at Los Angeles Union Station to the Metropolitan Water District.
Residential sales in 1997 are from the Catellus Residential Group. There were
no residential sales in the second quarter of 1996.
Development and management fee income, net increased by $1.0 million in 1997
compared to 1996. This increase was primarily from an increase in management
fees from the management contracts signed in January 1996 and higher development
fees from the construction project at Los Angeles Union Station, partially
offset by a decrease in residential management fees.
Equity in earnings of development joint ventures increased by $1.1 million in
1997 compared to 1996. The increase is primarily attributable to earnings from
CRG, which was acquired in March 1996, and the sale of property in a joint
venture.
The reduction in losses from land holding costs, net is primarily attributable
to sales of properties, a reduction in property taxes of "for sale properties"
and property tax refunds.
Other Items on the Statement of Operations
- ------------------------------------------
Interest expense was $.6 million lower in 1997 compared to 1996 primarily as
a result of an increase in capitalized interest and lower mortgage debt.
14
<PAGE>
Following is a summary of interest costs:
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------------------------------------
1997 1996 Difference
------------------- ------------------ ----------------
<S> <C> <C> <C>
(in thousands)
Total interest costs............................................ $11,331 $11,140 $ 191
Interest capitalized............................................ (1,126) (299) (827)
------- ------- ------
Interest expensed............................................... 10,205 10,841 (636)
Interest income................................................. (216) (356) 140
------- ------- -----
$ 9,989 $10,485 $(496)
======= ======= =====
</TABLE>
General and administrative expense increased by $.7 million primarily because
of higher staffing levels associated with increased operating and development
activities.
The increase from 1996 to 1997 in the Company's gain on sales of non-
strategic land and other property is summarized as follows (see further comments
regarding gross margin in Variability in Results section on page 16):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
------------------------------------------------------------
1997 1996 DIFFERENCE
-------------------- ----------------- --------------
(in thousands)
<S> <C> <C> <C>
Sales................................................................ $1,784 $24,146 $(22,362)
Cost of sales........................................................ 1,366 16,788 (15,422)
------ ------- --------
Gain................................................................. $ 418 $ 7,358 $ (6,940)
====== ======= ========
</TABLE>
At the end of 1996, the Company successfully completed a $100 million non-
strategic land sales program for the 15 months ended December 31, 1996. The
level of sales in 1997 is expected to be much lower than 1996.
Other, net decreased by $.3 million primarily because of lower interest income
in 1997 compared to 1996.
Preferred Stock Dividends
- --------------------------
The Company completed a series of preferred stock calls during 1996 and the
first six months of 1997. The result has been the retirement of all outstanding
preferred shares and the elimination of preferred dividends. The following is a
summary of the calls completed and issued in 1997:
- In December 1996, the Company called for redemption of approximately $25
million of its $3.75 Cumulative Convertible Series A Preferred Stock
(Series A Preferred Stock). In January 1997, of the 475,000 preferred
shares called, 471,730 shares were converted into 2,603,168 common
shares and 3,270 shares were redeemed at $52.625 per share plus accrued
and unpaid dividends at a cost of approximately $175,000.
- On February 5, 1997, the Company called for redemption of approximately
$90 million of its Series A Preferred Stock. On March 24, 1997, of the
1,720,000 preferred shares called, 1,715,837 shares were converted into
9,469,015 common shares and the remaining shares were redeemed at $52.25
per share plus accrued and unpaid dividends at a cost of approximately
$220,000.
- On March 24, 1997, the Company called for redemption of the remaining
outstanding 250,000 shares, or approximately $13 million, of its Series
A Preferred Stock and 1,470,000 shares, or approximately $75 million, of
its $3.625 Series B Cumulative Convertible Exchangeable Preferred Stock
(Series B Preferred Stock). The redemption date was May 1, 1997. The
results were the conversion of 99.7% of the Series A Preferred Stock
shares into 1,376,742 shares of common stock and the redemption of the
remaining shares
15
<PAGE>
at $52.25 per share plus accrued and unpaid dividends at a cost of
approximately $45,000; additionally, the Series B Preferred Stock shares
were converted into approximately 7,500,000 shares of common stock.
- On May 1, 1997, the Company called for redemption of the remaining
outstanding 1,520,000 shares, or approximately $80 million, of its
Series B Preferred Stock. In June 1997, all of the remaining Series B
Preferred Stock shares were converted into 7,758,201 shares of common
stock.
VARIABILITY IN RESULTS
The timing of development sales and non-strategic land and other
property sales have resulted in significant variability in the Company's
historic operating results, particularly on a quarterly basis. Many of the
Company's projects require a lengthy process to complete the development cycle
before they are sold. Asset sales are generally subject to lengthy negotiations
and contingencies that need to be resolved prior to closing. These factors tend
to "bunch" income in particular periods rather than a more even pattern
throughout a year. In addition, gross margins vary significantly as the mix of
properties varies. The cost basis of the properties sold varies because- a) a
number of properties have been owned for many decades; b) some properties were
acquired within the last ten to fifteen years; and c) properties are owned in
various geographical locations.
EARNINGS BEFORE DEPRECIATION AND DEFERRED TAXES
The Company uses a supplemental performance measure along with net
earnings (loss) to report its operating results. This measure, Earnings Before
Depreciation and Deferred Taxes (EBDDT), is not a measure of operating results
or cash flows from operating activities as defined by generally accepted
accounting principles. Additionally, EBDDT is not necessarily indicative of cash
available to fund cash needs and should not be considered as an alternative to
cash flows as a measure of liquidity. However, the Company believes that EBDDT
provides relevant information about its operations and is necessary, along with
net earnings (loss), for an understanding of its operating results.
Depreciation, amortization and deferred income taxes are excluded from
EBDDT as they represent non-cash charges. Gains on the sale of non-strategic
land and other property represent non-operating, unusual and/or nonrecurring
items and are therefore excluded from EBDDT. EBDDT is reconciled to net earnings
(loss) as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------- ---------------------------
1997 1996 1997 1996
----------- ------------ ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
NET EARNINGS (LOSS) APPLICABLE TO COMMON STOCKHOLDERS... $ 5,685 $ 2,864 $ 9,441 $ (1,375)
Depreciation and amortization...................... 7,723 7,432 15,199 15,104
Deferred income taxes.............................. 3,307 5,778 6,278 6,953
Gain on non-strategic land and other property
sales........................................... (418) (7,358) (4,058) (10,445)
-------- ------- ------- --------
EARNINGS BEFORE DEPRECIATION AND DEFERRED TAXES........ $ 16,297 $ 8,716 $26,860 $ 10,237
======== ======= ======= ========
Earnings before depreciation and deferred taxes
per share of common stock.......................... $ 0.16 $ 0.12 $ 0.29 $ 0.14
======== ======= ======= ========
Average number of common shares
outstanding....................................... 100,327 74,501 91,493 73,877
======== ======= ======= ========
</TABLE>
16
<PAGE>
The increase in EBDDT in both the second quarter and the first six
months of 1997 as compared to the second quarter and the first six months of
1996 was primarily due to improved results from the Company's industrial income-
producing properties and the reduction in preferred stock dividends as a result
of the redemption or conversion of all preferred shares as discussed on page 15.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities
Cash provided by operating activities reflected in the statement of
cash flows for the six months ended June 30, 1997 and 1996 were $36.7 million
and $48.1 million, respectively. The decrease in 1997 is primarily attributable
to higher capital expenditures for residential development property.
Cash flow from investing activities
Net cash used in investing activities reflected in the statement of
cash flows increased $64.6 million from 1996 to 1997. The increased use in 1997
is primarily attributable to increases in capital expenditures, contributions
to joint ventures and restricted cash. Capital expenditures totaling $55.0
million and $19.9 million in the first six months of 1997 and 1996 include
capitalized interest and property taxes totaling $2.9 million and $.6 million,
respectively. Net cash used in investing activities included the following
capital expenditures:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
(in
thousands)
Construction and building improvements................................... $35,319 $ 9,921
Predevelopment........................................................... 5,540 4,376
Infrastructure and other................................................. 6,089 1,811
Capitalized interest, property taxes and overhead........................ 7,433 3,831
Capitalized leases....................................................... 570 --
------- -------
$54,951 $19,939
======= =======
</TABLE>
Predevelopment relates to entitlements of the Company's major mixed-
use projects which are primarily Mission Bay in San Francisco, California and
Pacific Commons in Fremont, California. Significant developments related to
these projects during the second quarter include:
- Mission Bay, San Francisco, CA - The Company continues to work with
the City and other governmental agencies to obtain approvals for
proposed projects at Mission Bay. The Mission Bay North development
proposal covers 3,000 housing units (80% of which are market-rate) and
600,000 square feet of retail/entertainment development. The Mission
Bay South development proposal covers 5.0 million square feet of
leasable area for commercial uses, including biotechnology, multimedia
facilities and office space, 250,000 square feet of retail, and a 500-
room hotel. In addition, the Mission Bay South plan includes 3,000
residential units, of which 1,100 will be affordable and 1,900 will be
market-rate for-sale and for-rent units and contemplates the
contribution by the City and the Company of an expansion campus site
for the University of California at San Francisco. The University of
California Board of Regents has extended until September 15, 1997 an
exclusive negotiating period for a conditional agreement to locate the
proposed expansion campus of the University of California at San
Francisco at Mission Bay.
17
<PAGE>
Final approval of both Mission Bay North and South is subject to a
certification of an environmental impact report, negotiation and approval
of an owner participation agreement with the San Francisco Redevelopment
Agency, and receipt of the adoption of environmental fundings by various
agencies including the San Francisco Board of Supervisors. There can be no
assurances that the necessary approvals will be obtained, that the timing
of approvals, if obtained, will meet market needs, or that the timing of
the other conditions will be met.
- - Pacific Commons, Fremont, CA - In September 1996, the Company entered into
a Development Agreement with the City of Fremont for 8.4 million square
feet of development. The Company continues to work with the City of Fremont
and various federal, state and local agencies to address the impact of the
approved Pacific Commons development on wetlands and special status
species. The Company has completed its predevelopment species and wetlands
surveys. Based on those results, the Company and the City of Fremont have
filed a modified application for a permit to undertake the proposed
development activities. The application includes an enhanced mitigation
proposal for the project. Discussions concerning the amount of development
available for 1997 and required mitigation measures for the rest of the
site are continuing; however, it is not possible to predict at this time
what will be the timing for the conclusions of these discussions. There can
be no assurances that necessary entitlements will be obtained, that the
timing of entitlements, if obtained, will meet market needs, or that the
timing of the other conditions will be met.
Industrial development activity is summarized below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------- -----------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
(in square feet) (in square feet)
<S> <C> <C> <C> <C>
Construction and completion
Under construction, beginning of period 2,021,200 986,525 2,286,961 641,128
Construction starts 303,000 777,711 346,000 1,123,108
Completion (538,000) (201,600) (846,761) (201,600)
--------------- --------------- --------------- ---------------
Under construction, end of period 1,786,200 1,562,636 1,786,200 1,562,636
=============== =============== =============== ===============
</TABLE>
The Company completed 538,000 square feet of industrial development
during the second quarter of 1997, bringing total construction completed year-
to-date to 846,761 square feet.
As of June 30, 1997, the Company had an additional 1.8 million square feet
under construction, which is expected to be completed by year-end. Of the 1.8
million square feet under construction, 1.6 million square feet will be added to
the Company's portfolio.
CRG entered into a joint venture which acquired the 3,470-acre Talega
Valley land development project in San Clemente, California. The venture will
develop up to 4,965 residential lots in a master-planned community. CRG
contributed $11.2 million to this project and has right of first refusal to
build on 1,000 of the lots.
Cash flow from financing activities
Net cash provided by financing activities reflected in the statement of
cash flows for the first six months of 1997 was $37.6 million compared to $43.3
million cash used in financing activities for the first six months of 1996. The
increase is primarily from additional net borrowings of $77.1 million, $2.2
million in proceeds from issuance of common stock and $6.0 million lower
preferred stock dividends paid offset by $3.8 million in distributions to
minority partners.
18
<PAGE>
On June 30, 1997, the Company had total outstanding debt of $541.5 million,
of which 64.42% was non-recourse to the Company and secured by certain property
of the Company, 35.19% was recourse to the Company and also secured by certain
property, and 0.39% was unsecured. During the next twelve months, approximately
$40.0 million of debt matures, consisting of construction financing, term loans
or first mortgage loans. All maturing debt is expected to be repaid upon sale of
the property securing it, extended, refinanced or repaid.
Capital commitments
On June 30, 1997, the Company had approximately $23.7 million in capital
expenditure commitments. These commitments are primarily to fund the
construction of industrial development projects, predevelopment costs and re-
leasing costs. See comments below regarding the sources of funding for capital
requirements.
Cash balances, available borrowings and capital resources
On June 30, 1997, cash and cash equivalents totaled $30.5 million,
including $11.9 million in restricted cash representing proceeds from a June
1997 development property sale. The restricted cash is being held in a separate
cash account at a title company in order to preserve the Company's option of
reinvesting the proceeds on a tax deferred basis. In addition, the Company had
available $50.4 million under its secured revolving credit facility, $1.9
million under its development construction facility, $18.8 million under its
residential construction facilities, and a commitment for $25 million under an
unsecured line of credit.
The Company's short- and long-term liquidity and capital resources
requirements will essentially be provided from three sources: ongoing operating
income from rental properties, proceeds from development, non-strategic and
other asset sales, and fee services income. As noted above, a secured revolving
line of credit, an unsecured line of credit, a construction line of credit, and
residential construction loan facilities are available to the Company for
meeting liquidity requirements. Additionally, the Company will use third-party
borrowing for development projects to the extent practical.
ENVIRONMENTAL MATTERS
Many of the Company's properties are in urban and industrial areas and
may have been leased to or previously owned by commercial and industrial tenants
that may have discharged hazardous materials. The Company incurs on-going
environmental remediation costs, including clean-up costs, consulting fees for
environmental studies and investigations, monitoring costs, and legal costs
relating to clean-up, litigation defense and the pursuit of responsible third
parties. Such costs incurred in connection with operating properties and
properties previously sold are expensed. As of June 30, 1997, the Company has
provided a reserve of $13.2 million for such costs. These costs are expected to
be incurred over an estimated ten-year period, with a substantial portion
incurred over the next five years.
Environmental costs incurred for properties to be sold are deferred
and will be charged to cost of sales when the properties are sold. Such costs
relating to undeveloped properties are capitalized as part of development costs.
On June 30, 1997, the Company's estimate of its potential liability for
identified environmental costs relating to properties to be developed or sold
ranged from $12.6 million to $38.6 million. These costs generally will be
capitalized as they are incurred over the course of the estimated development
period of approximately 20 years. Environmental costs capitalized for the first
six months of 1997 and 1996 totaled $1.5 million and $1.1 million, respectively.
While the Company or outside consultants have evaluated the environmental
liabilities associated with most of the Company's properties, any evaluation
necessarily is based upon then prevailing law and identified site conditions.
The Company monitors its exposure to environmental costs on a regular basis.
Although an unexpected event could have a material impact on the results of
operations for any period, the Company does not believe that such costs for
identified liabilities will have a material adverse effect on its financial
condition.
19
<PAGE>
RISK FACTORS
It is the Company's belief that this quarterly report on Form 10-Q may
contain statements which, to the extent that they are not recitations of
historical fact, may constitute "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
and Exchange Act of 1934. All forward-looking statements involve risks and
uncertainties. Any forward-looking statements in this document are intended to
be subject to the safe harbor protection provided by Section 27A and 21E.
Factors that most typically affect the Company's operating results and financial
condition include (i) changes in general economic conditions in regions in which
the Company's projects are located, (ii) supply and demand for office,
industrial, and residential space, (iii) the delay in receipt of or the denial
of government approvals and entitlements for development projects, (iv) other
public and private development activity in the areas in which the Company owns
property, (v) land and building material costs, (vi) the availability and cost
of project financing, (vii) competition from other property owners, (viii)
liability for environmental remediation at the Company's properties, (ix) the
Company's ability to increase development fees, (x) the Company's ability to
sell non-strategic assets, (xi) changes in the capital markets affecting the
ability of the Company to minimize its interest and preferred dividends, (xii)
the Company's ability to control the timing of the recognition of deferred tax
liability, (xiii) the impact of discretionary government actions, (xiv) the
exposure of the Company's assets to natural occurrences, such as earthquakes,
tornadoes, and similar events, and (xv) changes in the legal and regulatory
environment, including the tax treatment of the Company's activities and assets.
For discussions identifying other important factors that could cause actual
results to differ materially from those anticipated in the forward-looking
statements, see the Company's Securities and Exchange Commission filings,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of this Form 10-Q and the Company's Form 10-K for the year ended
December 31, 1996, Note 7 to the Consolidated Financial Statements included in
this Form 10-Q and Note 15 to the Consolidated Financial Statements included in
the Company's Form 10-K for the year ended December 31, 1996. The Company
cautions that the foregoing list of risk factors is not exclusive. Further, the
Company does not undertake to update any forward-looking statements that may be
made from time to time by or on behalf of the Company.
20
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on May 29,1997,
stockholders voted with respect to the election of directors:
<TABLE>
<CAPTION>
FOR ABSTAINED
----------------- ---------------
<S> <C> <C>
Election of Directors
Joseph F. Alibrandi 82,209,205 250,087
Daryl J. Carter 82,213,315 245,977
Richard D. Farman 82,199,943 259,349
Christine Garvey 82,210,817 248,475
William M. Kahane 82,195,185 264,107
Donald McNamara 82,196,673 262,619
Leslie D. Michelson 82,195,060 264,232
Nelson C. Rising 82,214,894 244,398
Joseph R. Seiger 82,217,622 241,670
Jacqueline R. Slater 82,216,219 243,073
Thomas M. Steinberg 82,210,837 248,455
Beverly Benedict Thomas 82,208,368 250,924
</TABLE>
On May 29, 1997, Joseph Seiger resigned as a member of the Board of
Directors and Jacqueline R. Slater was elected as Non-Executive
Chairman of the Board.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit No. 27 Financial Data Schedule
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Catellus Development Corporation has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CATELLUS DEVELOPMENT CORPORATION
Date: August 14, 1997 By: /s/ Stephen P. Wallace
-------------------------- -------------------------------------
Stephen P. Wallace
Senior Vice President and
Chief Financial Officer
Date: August 14, 1997 By: /s/ Paul A. Lockie
-------------------------- --------------------------------------
Paul A. Lockie
Vice President and Controller
22
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
27 Financial Data Schedule
(Article 5 of Regulation S-X)
</TABLE>
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 18,608
<SECURITIES> 0
<RECEIVABLES> 22,124
<ALLOWANCES> 2,004
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,287,613
<DEPRECIATION> 222,278
<TOTAL-ASSETS> 1,166,249
<CURRENT-LIABILITIES> 0
<BONDS> 541,463
0
0
<COMMON> 1,063
<OTHER-SE> 432,998
<TOTAL-LIABILITY-AND-EQUITY> 1,116,249
<SALES> 43,198
<TOTAL-REVENUES> 115,933
<CGS> 35,502
<TOTAL-COSTS> 77,726
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 197
<INTEREST-EXPENSE> 19,999
<INCOME-PRETAX> 18,208
<INCOME-TAX> 7,414
<INCOME-CONTINUING> 10,794
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,794
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
