<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 SEPTEMBER 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 October 27, 1997, there were 106,500,922 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 September 30, 1997 and
December 31, 1996.......................................... 2
Consolidated Statement of Operations for the three months
and nine months ended September 30, 1997 and 1996.......... 3
Consolidated Statement of Cash Flows for the nine months
ended September 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...................................................... 20
SIGNATURES....................................................................... 21
</TABLE>
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Properties...................................................... $1,335,742 $1,235,440
Less accumulated depreciation................................... (228,970) (211,338)
---------- ----------
1,106,772 1,024,102
---------- ----------
Other assets and deferred charges................................ 48,527 50,547
Notes receivable................................................. 16,937 11,924
Accounts receivable, less allowances............................. 16,711 12,965
Restricted cash................................................. 2,181 --
Cash and cash equivalents........................................ 15,133 23,580
---------- ----------
Total............................................. $1,206,261 $1,123,118
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage and other debt.......................................... $ 563,641 $ 496,742
Accounts payable and accrued expenses............................ 44,610 54,178
Deferred credits and other liabilities........................... 39,435 43,007
Deferred income taxes............................................ 116,667 106,738
---------- ----------
Total liabilities...................................... 764,353 700,665
---------- ----------
Commitments and contingencies (Note 7)
Stockholders' equity
Preferred stock............................................. -- 274,428
Common stock - 106,488,153 and 77,028,099 shares issued and
outstanding at September 30, 1997 and December 31, 1996... 1,065 770
Paid-in capital............................................. 474,225 197,709
Accumulated deficit.......................................... (33,382) (50,454)
---------- ----------
Total stockholders' equity............................. 441,908 422,453
---------- ----------
Total............................................. $1,206,261 $1,123,118
========== ==========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -----------------
1997 1996 1997 1996
--------- --------- --------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCOME PRODUCING PROPERTIES
Rental revenue......................................... $ 32,901 $ 28,606 $ 95,127 $ 86,020
Property operating costs............................... (9,747) (9,953) (28,848) (28,868)
Equity in earnings of joint ventures, net.............. 1,096 1,168 5,963 4,460
-------- -------- -------- --------
24,250 19,821 72,242 61,612
-------- -------- -------- --------
DEVELOPMENT ACTIVITIES AND FEE SERVICES
Gain on development property sales..................... 3,368 2,747 7,006 9,315
Development and management fee income, net............. 2,223 1,182 4,377 1,995
Equity in earnings (losses) of joint ventures, net..... 282 4 1,507 (42)
Land holding costs, net................................ (492) (1,113) (834) (2,918)
-------- -------- -------- --------
5,381 2,820 12,056 8,350
-------- -------- -------- --------
Interest expense............................................ (10,035) (10,536) (30,034) (32,316)
Depreciation and amortization............................... (7,839) (7,550) (23,038) (22,654)
General and administrative expense.......................... (2,926) (1,661) (8,242) (5,718)
Gain on non-strategic land and other asset sales............ 570 1,330 4,628 11,775
Litigation and environmental costs, net..................... 1,100 50 1,142 950
Other, net.................................................. 90 375 45 439
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES................................ 10,591 4,649 28,799 22,438
Income tax expense.......................................... (4,313) (1,897) (11,727) (9,155)
-------- -------- -------- --------
NET EARNINGS........................................... 6,278 2,752 17,072 13,283
Preferred stock dividends......................... -- (5,215) (1,353) (17,121)
Premium on redemption of preferred stock.......... -- (1,334) -- (1,334)
-------- -------- -------- --------
NET EARNINGS (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ 6,278 $ (3,797) $ 15,719 $ (5,172)
======== ======== ======== ========
Net earnings (loss) per share of common stock.......... $0.06 $(0.05) $0.16 $(0.07)
======== ======== ======== ========
Average number of common shares outstanding............ 109,924 75,002 97,702 74,251
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1997 1996
------- ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: (UNAUDITED)
Net earnings..................................................... $ 17,072 $ 13,283
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization............................... 23,038 22,654
Deferred income taxes....................................... 9,930 8,764
Amortization of deferred loan fees and other costs.......... 2,218 2,562
Equity in earnings (losses) of joint ventures............... (7,470) (4,418)
Operating distributions from joint ventures................. 8,177 7,941
Cost of non-strategic land and development properties sold.. 43,855 35,986
Gain on sales of other assets............................... (1,600) (4,706)
Expenditures for development properties..................... (48,619) (11,209)
Other, net.................................................. 1,834 2,123
Change in operating assets and liabilities.................. (4,140) 2,911
--------- --------
Net cash provided by operating activities............................. 44,295 75,891
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................. (94,781) (48,171)
Tenant improvements.............................................. (4,631) (2,669)
Net proceeds from sale of other assets........................... 2,623 7,459
Contributions to joint ventures.................................. (15,910) --
Restricted cash for future investment............................ (2,181) --
--------- --------
Net cash used in investing activities................................. (114,880) (43,381)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings....................................................... 117,588 58,200
Repayment of borrowings.......................................... (48,393) (52,220)
Dividends paid................................................... (5,975) (18,011)
Redemption of preferred stock.................................... (471) (26,739)
Distributions to minority partners............................... (3,976) --
Proceeds from issuance of common stock........................... 3,365 149
--------- --------
Net cash provided by (used in) financing activities................... 62,138 (38,621)
--------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS ............................ (8,447) (6,111)
Cash and cash equivalents at beginning of period...................... 23,580 27,743
--------- --------
Cash and cash equivalents at end of period............................ $ 15,133 $ 21,632
========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized)........................ $ 27,490 $ 29,819
Income taxes................................................ $ 699 $ 868
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
NOTE 1. DESCRIPTION OF BUSINESS
Catellus Development Corporation (the Company) is a diversified real estate
operating company, with a large portfolio of income-producing properties and
developable land, 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.
NOTE 3. NEW ACCOUNTING STANDARDS
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 4. RESTRICTED CASH
Restricted cash at September 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 5. EARNINGS PER SHARE
Net earnings (loss) per share of common stock is computed by dividing net
earnings (loss), after reduction for preferred stock dividends and premium on
redemption of preferred stock, by the weighted average number of shares of
common stock and 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 $0.06
and $0.16 for the three and nine month periods ended September 30, 1997 had the
conversions discussed in Note 9 occurred at the beginning of each period.
5
<PAGE>
NOTE 6. MORTGAGE AND OTHER DEBT
Mortgage and other debt at September 30, 1997 and December 31, 1996 are
summarized as follows (in thousands) :
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
First mortgage loan - Prudential.... $253,011 $259,063
Secured revolving credit line....... 176,100 118,600
First mortgage loans................ 66,207 67,249
Residential construction loans...... 20,099 10,105
Assessment district bonds........... 18,341 21,012
Term loan - secured................. 12,965 9,000
Construction loans - secured........ 7,612 5,028
Secured promissory note............. 8,330 6,160
Other loans......................... 976 525
-------- --------
Total mortgage and other debt.. $563,641 $496,742
======== ========
Due in one year..................... $ 35,956 $ 24,221
======== ========
</TABLE>
Interest costs relating to mortgage and other debt for the three and nine
month periods ended September 30, 1997 and 1996 are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total interest incurred.. $11,749 $10,790 $34,354 $33,134
Interest capitalized..... (1,714) (254) (4,320) (818)
------- ------- ------- -------
Interest expensed... $10,035 $10,536 $30,034 $32,316
======= ======= ======= =======
</TABLE>
NOTE 7. PROPERTIES
Net book value by property type at September 30, 1997 and December 31, 1996
consisted of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------- -------------
<S> <C> <C>
Income-producing properties:
Industrial buildings................................ $ 356,062 $ 291,608
Office buildings.................................... 104,850 108,184
Retail buildings.................................... 83,944 86,070
Land development.................................... 334,714 323,134
Land leases......................................... 8,299 6,627
---------- ----------
888,169 815,623
---------- ----------
Land holdings:
Developable properties.............................. 200,882 200,624
Natural resources................................... 3,695 2,299
Properties held for sale............................ 30,772 37,223
---------- ----------
235,349 240,146
---------- ----------
Other (including proportionate share of joint ventures'
net deficits of $26,733 and $41,058)................ (16,746) (31,667)
---------- ----------
$1,106,772 $1,024,102
========== ==========
</TABLE>
6
<PAGE>
NOTE 8. 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 September 30, 1997, management estimates that future costs for
remediation of identified or suspected environmental contamination on operating
properties and properties previously sold approximate $12.9 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
$38.4 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 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 9. PREFERRED STOCK CONVERSION/REDEMPTION
During 1996, the Company commenced a series of calls for redemption of its
outstanding preferred stock. As a result of these calls, during 1996, 453,326
shares of Series A preferred stock were converted into 2,501,783 common shares
and 508,113 shares of Series A preferred stock were redeemed at a cost of
approximately $26.7 million. In 1997, the remaining 2,480,671 shares of Series A
preferred stock and all of the Series B preferred stock were converted into
29,001,469 shares of Common Stock, with 7,889 shares of Series A preferred stock
redeemed at a cost of approximately $440,000. With the completion of these
preferred stock calls in June 1997, the Company has no remaining outstanding
preferred stock.
NOTE 10. SUBSEQUENT EVENT
On October 31, 1997, the Company filed a registration statement in
connection with a proposed underwritten public offering of a portion of the
Company's common stock currently held by the California Public Employees'
Retirement System ("CalPERS"). Of the more than 37,750,000 shares of Catellus
common stock currently held by CalPERS, the registration statement will include
16,500,000 shares (plus an additional 2,475,000 shares to cover
over-allotments), or approximately one-half of CalPERS' holdings. CalPERS'
request was made in accordance with an existing registration rights agreement.
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.
OVERVIEW
In the second half of 1994, the Company began building a new senior
management team and undertook a number of steps designed to eliminate
operating deficits, restructure the organization, enhance its core
competencies, improve the capital structure and sell non-productive land
assets. In particular, the Company:
. Sold $167.0 million of non-strategic assets from January 1, 1995 through
September 30, 1997, using the proceeds to pay down a portion of its
existing debt and fund new development.
. Increased development activity with industrial construction starts of
381,000 square feet in 1994, 792,000 square feet in 1995, and 3.3
million square feet in 1996 and expects to exceed the 1996 level in
1997.
. Acquired The Akins Companies (now Catellus Residential Group), an
established residential developer located in Southern California, to
position the Company to pursue residential development opportunities.
. Completed a series of redemption calls for all outstanding preferred
shares, eliminating approximately $24 million in annual preferred stock
dividend payments. A total of $25.8 million of preferred stock was
redeemed and $296.7 million was converted into common equity.
. Decreased the Company's ratio of debt and preferred stock to total
market capitalization from 66.6% at December 31, 1994 to 20.3% at
September 30, 1997.
. Improved operating results with earnings before depreciation and
deferred taxes increasing from $14.7 million in 1994 to $18.3 million in
1995, $25.9 million in 1996 and $44.1 million for the nine months ended
September 30, 1997.
The Company intends to focus on increasing EBDDT by continuing to increase
the development of its significant land portfolio, opportunistically acquiring
new properties and businesses to support additional development, and by
providing third-party fee development and management services. In addition,
the Company will continue to focus on maximizing cash flow from its portfolio
of income-producing assets. Capital to fund this planned growth is expected to
come from operations, sales of non-strategic assets and debt. In the future,
the Company will continue to assess the feasibility of entering into
complementary new lines of business and refining or reconfiguring its existing
portofolio to take account of its experience, opportunities presented and
changing market conditions.
Although the Company has a large portfolio of income-producing properties
that provides stable operating results, the Company's earnings from period to
period will be affected by the nature and timing of sales of development
property and non-strategic assets. Many of the Company's projects require a
lengthy process to complete the development cycle before they are sold.
Additionally, sales of non-strategic assets are difficult to predict and are
generally subject to lengthy negotiations and contingencies that need to be
resolved prior to closing. These factors tend to "bunch" income in the
particular periods rather than producing a more even pattern throughout the
year. In addition, gross margins may vary significantly as the mix of property
varies. The cost basis of the properties sold varies because (i) a number of
properties have been owned for many decades; (ii) some properties were
acquired within the last ten to fifteen years; and (iii) properties are owned
in various geographical locations.
RESULTS OF OPERATIONS
Comparison of nine months ended September 30, 1997 and 1996
Income-Producing Properties
- ---------------------------
Rental revenue and property operating costs for the Company's income-
producing properties for the nine months ended September 30, 1997 and 1996 are
summarized below (in thousands):
<TABLE>
<CAPTION>
RENTAL REVENUES PROPERTY OPERATING COSTS
-------------------------------- -------------------------------
NINE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1997 1996 DIFFERENCE 1997 1996 DIFFERENCE
--------- -------- ----------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Industrial buildings.. $49,010 $41,156 $7,854 $10,586 $10,307 $ 279
Office buildings...... 21,830 21,373 457 9,419 9,107 312
Retail buildings...... 10,029 9,966 63 2,942 3,273 (331)
Land development...... 8,441 7,670 771 5,226 5,359 (133)
Land leases........... 5,817 5,855 (38) 675 822 (147)
------- ------- ------ ------- ------- -----
$95,127 $86,020 $9,107 $28,848 $28,868 $ (20)
======= ======= ====== ======= ======= =====
</TABLE>
8
<PAGE>
Building square footage owned, square footage leased and occupancy are as
follows:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
------------------------------------
1997 1996
------------------ ----------------
(in thousands, except percentages)
<S> <C> <C>
Industrial buildings
Square feet owned... 13,963 12,411
Square feet leased.. 13,675 11,998
Percent leased...... 97.9% 96.7%
Office buildings
Square feet owned... 1,620 1,682
Square feet leased.. 1,542 1,484
Percent leased...... 95.2% 88.2%
Retail buildings
Square feet owned... 928 928
Square feet leased.. 862 871
Percent leased...... 92.9% 93.8%
Land development
Square feet owned... 1,231 1,231
Square feet leased.. 1,135 1,127
Percent leased...... 92.2% 91.6%
Total
Square feet owned... 17,742 16,252
Square feet leased.. 17,214 15,480
Percent leased...... 97.0% 95.2%
</TABLE>
The increase in revenue from industrial buildings is primarily attributable
to the net addition of eight buildings totaling approximately 1.6 million square
feet that were added to the portfolio since October 1996. Approximately $5.9
million of the increase was attributable to base rents for the new buildings,
approximately $0.6 million was attributable to higher tenant pass-through
charges associated with the new construction and approximately $1.2 million was
a result of increases in rental rates and tenant pass-through charges under
existing leases.
Rental revenue for the Company's office portfolio increased by $0.5 million
for the nine months ended September 30, 1997, compared to the same period in
1996, primarily because of higher rental rates and occupancy for the nine months
ended September 30, 1997. Operating costs for office buildings increased by $0.3
million, primarily as a result of higher utility costs and property taxes.
The $0.3 million decrease in property operating costs for the retail
buildings was primarily due to a reduction in property tax assessments.
The $0.8 million increase in rental revenue from the land development
portfolio resulted from higher occupancies and expense recoveries at these
properties.
The decrease in revenues and expenses from land leases from the nine months
ended September 30, 1996 compared to the same period in 1997 is primarily
attributable to the sale of a land lease in mid-1996.
9
<PAGE>
In total, property operating costs were lower for the nine months ended
September 30, 1997 as compared to the same period in 1996 because of lower
overhead costs associated with property operations and lower insurance premiums.
Income-producing joint venture earnings, net increased by $1.5 million
primarily because of higher occupancies and room rates in certain hotel joint
ventures and higher occupancy and lower interest expense for an apartment
building joint venture.
Development Activities and Fee Services
- ---------------------------------------
Gain on development property sales was $7.0 million in the nine months
ended September 30, 1997 compared to $9.3 million for the same period in 1996,
summarized as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1997 1996 DIFFERENCE
-------- --------- -----------
<S> <C> <C> <C>
COMMERCIAL SALES:
Sales..................................... $24,607 $27,428 $(2,821)
Cost of sales............................. 18,703 18,113 590
------- ------- -------
Gain.......................... 5,904 9,315 (3,411)
------- ------- -------
RESIDENTIAL SALES:
Sales..................................... 23,645 -- 23,645
Cost of sales............................. 22,543 -- 22,543
------- ------- -------
Gain.......................... 1,102 -- 1,102
------- ------- -------
TOTAL GAIN ON DEVELOPMENT PROPERTY SALES.. $ 7,006 $ 9,315 $(2,309)
======= ======= =======
</TABLE>
The 1996 results include a $5 million gain from the sale of a 4.2 acre site
to the Metropolitan Water District at Los Angeles Union Station. The 1997
results include a $2.2 million gain from the sale of a 279,000-square-foot
industrial building in La Mirada, California. Residential sales in 1997 are
from the Company's residential group which was formed in March 1996. There were
no residential sales for the nine months ended September 30, 1996.
The Company expects there will be significant variability in income
generated from its development activities.
10
<PAGE>
Following is a summary of development property sales under contract but not
closed (in thousands):
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
-------------------
1997 1996
--------- --------
<S> <C> <C>
Commercial................................ $13,924 $11,678
Residential (lot and unit sales)
Joint venture projects /(1)/...... $45,720 $21,215
Management projects /(2)/......... $24,241 $16,953
</TABLE>
/(1)/ The amounts shown are 100% of the gross sales price; the Company is
entitled to receive 50% of the net profits from these joint ventures.
/(2)/ The amounts shown are 100% of the gross sale price; the Company receives a
fee based on the sales of these units, which averages 5% of revenues.
Development and management fee income, net increased by $2.4 million for
the nine months ended September 30, 1997 compared to the same period in 1996.
This increase came primarily from an increase in management fees from management
contracts signed in 1996 and higher development fees from a construction project
at Los Angeles Union Station that began in June 1996.
Equity in earnings (losses) of development joint ventures, net increased by
$1.5 million for the nine months ended September 30, 1997 compared to the same
period in 1996. The increase is primarily attributable to a 1997 property sale
from a land development joint venture and to higher residential joint venture
earnings.
The reduction in losses from land holding costs, net, for the nine months
ended September 30, 1997 compared to the same period in 1996 is primarily
attributable to sales of properties and property tax refunds.
Other Items on the Statement of Operations
- ------------------------------------------
Interest expense was $2.3 million lower in the nine months ended September
30, 1997 as compared to the same period in 1996 primarily as a result of an
increase in capitalized interest related to higher development activity in 1997.
Following is a summary of interest costs (in thousands) for the nine months
ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1997 1996 DIFFERENCE
-------- -------- -----------
<S> <C> <C> <C>
Total interest incurred........... $34,354 $33,134 $ 1,220
Interest capitalized.............. (4,320) (818) (3,502)
------- ------- -------
Interest expensed................. $30,034 $32,316 $(2,282)
======= ======= =======
</TABLE>
General and administrative expense increased by $2.5 million for the nine
months ended September 30, 1997 compared to the same period in 1996 primarily
because of an increase in the Company's overall activities.
11
<PAGE>
The decrease in gain on sales of non-strategic land and other property from
the nine months ended September 30, 1996 as compared to the same period in 1997
is summarized as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1997 1996 DIFFERENCE
-------- -------- ------------
<S> <C> <C> <C>
Sales........... $19,122 $43,300 $(24,178)
Cost of sales... 14,494 31,525 (17,031)
------- ------- --------
Gain....... $ 4,628 $11,775 $ (7,147)
======= ======= ========
</TABLE>
In 1995, the Company began an accelerated program of selling non-strategic
assets, with the proceeds intended to pay down a portion of existing debt and
fund new development. From 1995 through September 30, 1997, the Company sold
$167.0 million of non-strategic assets. In addition, at September 30, 1997,
$66.6 million of such assets were under contract or option for sale. Because of
the diminishing amount of such assets in the Company's portfolio, the Company
expects future sales of non-strategic land assets to be substantially lower than
the levels in the recent past.
Preferred Stock Dividends
- -------------------------
Preferred stock dividends declined by $15.8 million from the nine months
ended September 30, 1996 compared to the same period in 1997 as a result of the
preferred stock calls. During 1996, the Company commenced a series of calls for
redemption of its outstanding preferred stock compared to the same period in
1997. As a result of these calls, during 1996, a total of 453,326 Series A
preferred shares were converted into 2,501,783 common shares and 508,113 Series
A preferred shares were redeemed at a cost of approximately $26.7 million. In
1997, a total of 2,480,671 shares of Series A Preferred Stock and all of the
Series B Preferred Stock were converted into 29,001,469 shares of Common Stock,
with 7,889 shares of Series A Preferred Stock redeemed at a cost of
approximately $440,000. With the completion of these preferred stock calls in
June 1997, the Company has no remaining outstanding preferred stock.
12
<PAGE>
Comparison of three months ended September 30, 1997 and 1996
Income-Producing Properties
- ---------------------------
Rental revenue and property operating costs for the Company's income-
producing properties for the three months ended September 30, 1997 and 1996 are
summarized below (in thousands):
<TABLE>
<CAPTION>
RENTAL REVENUES PROPERTY OPERATING COSTS
-------------------------------- ---------------------------------
THREE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 30,
-------------------------------- ---------------------------------
1997 1996 DIFFERENCE 1997 1996 DIFFERENCE
--------- --------- ---------- ------ --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Industrial buildings.. $17,169 $14,064 $3,105 $3,567 $3,658 $ (91)
Office buildings...... 7,688 6,868 820 3,280 3,224 56
Retail buildings...... 3,373 3,203 170 1,017 965 52
Land development...... 2,811 2,640 171 1,668 1,897 (229)
Land leases........... 1,860 1,831 29 215 209 6
------- ------- ------ ------ ------ -----
$32,901 $28,606 $4,295 $9,747 $9,953 $(206)
======= ======= ====== ====== ====== =====
</TABLE>
The increase in revenue from industrial buildings is primarily attributable
to the net addition of eight new buildings totaling approximately 1.6 million
square feet that were added to the portfolio since October 1996. Approximately
$2.3 million of the increase was attributable to base rents for the new
buildings, approximately $0.4 million was attributable to higher tenant pass-
through charges associated with the new construction and approximately $0.4
million was a result of increases in rental rates and tenant pass-through
charges under existing leases.
Rental revenue for the Company's office portfolio increased by $0.8 million
for the three months ended September 30, 1997, compared to the same period in
1996, primarily due to higher rental rates and occupancy for the three months
ended September 30, 1997. Operating costs for office buildings increased by $0.1
million, primarily as a result of higher utility costs and property taxes.
The increase in revenue and expenses for the retail buildings was primarily
due to higher tenant pass-through charges.
The $0.2 million increase in rental revenue from the land development
portfolio resulted from higher occupancies and expense recoveries at these
properties. Operating costs for the land development portfolio decreased $0.2
million because of lower property taxes and repair and maintenance costs.
Despite the net addition of 1.6 million square feet of industrial buildings
for the three months ended September 30, 1997, total property operating costs
were lower because of lower overhead costs and insurance premiums.
Income-producing joint venture earnings net, decreased by $0.1 million
primarily because of lower occupancies in a hotel joint venture that was
partially offset by higher occupancy and lower interest expense for an office
building joint venture.
13
<PAGE>
Development Activities and Fee Services
- ---------------------------------------
Gain on development property sales was $3.4 million in the three months
ended September 30, 1997 compared to $2.7 million for the same period in 1996,
summarized as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------
1997 1996 DIFFERENCE
---------- ---------- ----------
<S> <C> <C> <C>
COMMERCIAL SALES:
Sales..................................... $9,091 $6,749 $2,342
Cost of sales............................. 5,693 4,002 1,691
------ ------ ------
Gain.......................... 3,398 2,747 651
------ ------ ------
RESIDENTIAL SALES:
Sales..................................... 5,228 -- 5,228
Cost of sales............................. 5,258 -- 5,258
------ ------ ------
Gain.......................... (30) -- (30)
------ ------ ------
TOTAL GAIN ON DEVELOPMENT PROPERTY SALES.. $3,368 $2,747 $ 621
====== ====== ======
</TABLE>
Residential sales in 1997 are from the Company's residential group which
was formed in March 1996. There were no residential sales for the three months
ended September 30, 1996.
The Company expects there will be significant variability in income
generated from its development activities.
Development and management fee income, net, increased by $1.0 million for
the three months ended September 30, 1997 compared to the same period in 1996.
This increase came primarily from an increase in management fees from management
contracts signed in 1996.
Equity in earnings (losses) of development joint ventures, net increased by
$0.3 million for the three months ended September 30, 1997 compared to the same
period in 1996. The increase is primarily attributable to higher residential
joint venture earnings.
The reduction in losses from land holding costs, net, for the three months
ended September 30, 1997 compared to the same period in 1996 is primarily
attributable to sales of properties and property tax refunds.
Other Items on the Statement of Operations
- ------------------------------------------
Interest expense was $0.5 million lower in the three months ended September
30, 1997 as compared to the same period in 1996 primarily as a result of an
increase in capitalized interest related to higher development activity in 1997.
Following is a summary of interest costs (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
-----------------------------------
1997 1996 DIFFERENCE
---------- --------- ------------
<S> <C> <C> <C>
Total interest incurred.... $11,749 $10,790 $ 959
Interest capitalized....... (1,714) (254) (1,460)
------- ------- -------
Interest expensed.......... $10,035 $10,536 $ (501)
======= ======= =======
</TABLE>
14
<PAGE>
General and administrative expense increased by $1.3 million for the
three months ended September 30, 1997 compared to the same period in 1996
primarily because of overall increased Company activities.
The decrease in gain on sales of non-strategic land and other property for
the three months ended September 30, 1996 to the same period in 1997 is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------
1997 1996 DIFFERENCE
-------- --------- ------------
<S> <C> <C> <C>
Sales........... $9,857 $12,934 $(3,077)
Cost of sales... 9,287 11,604 (2,317)
------ ------- -------
Gain....... $ 570 $ 1,330 $ (760)
====== ======= =======
</TABLE>
In 1995, the Company began an accelerated program of selling
non-strategic assets, with the proceeds intended to pay down a portion of
existing debt and fund new development. Because of the diminishing amount of
such assets in the Company's portfolio, the Company expects future sales of
non-strategic land assets to be substantially lower than the levels in the
recent past.
Litigation and environmental costs, net decreased by $1.1 million for
the three months ended September 30, 1997 compared to the same period in 1996
because of the resolution of a legal proceeding.
Preferred Stock Dividends
- -------------------------
Preferred stock dividends declined by $5.2 million from the three months
ended September 30, 1996 to the same period in 1997 as a result of the preferred
stock calls discussed above. With the completion of these preferred stock calls
in June 1997, the Company had no remaining outstanding preferred stock.
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.
15
<PAGE>
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 assets and premiums on the redemption of preferred stock
represent non-operating, unusual and/or nonrecurring items and are therefore
excluded from EBDDT. EBDDT is reconciled to net earnings (loss) as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -----------------
1997 1996 1997 1996
--------- --------- -------- -------
<S> <C> <C> <C> <C>
NET EARNINGS (LOSS) APPLICABLE TO COMMON STOCKHOLDERS.. $ 6,278 $(3,797) $15,719 $ (5,172)
Depreciation and amortization..................... 7,839 7,550 23,038 22,654
Deferred income taxes............................. 3,652 1,810 9,930 8,763
Gain on non-strategic land and other asset sales.. (570) (1,330) (4,628) (11,775)
Premium on redemption of preferred stock.......... -- 1,334 -- 1,334
-------- ------- ------- --------
EARNINGS BEFORE DEPRECIATION AND DEFERRED TAXES........ $ 17,199 $ 5,567 $44,059 $ 15,804
======== ======= ======= ========
Average number of common
shares outstanding................................ 109,924 75,002 97,702 74,251
======== ======= ======= ========
</TABLE>
The $28.3 million and $11.6 million increases in EBDDT for the nine-and
three-month periods ended September 30, 1997 compared to the same periods in
1996 were primarily due to reductions in preferred stock dividends and improved
results from income-producing assets.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities
Cash provided by operating activities reflected in the statement of cash
flows for the nine-month periods ended September 30, 1997 and 1996 was $44.3
million and $75.9 million, respectively. This $31.6 million decrease is
primarily due to a $37.4 million increase in 1997 expenditures for development
of residential properties developed for sale. For the nine months ended
September 30, 1997, the Company started construction on 79 residential units and
completed 64 units compared to 50 starts and 5 completions for the same period
in 1996.
Cash generated from sales of non-strategic land and development property
was $50.1 million and $53.4 million for the nine months ended September 30, 1997
and 1996, respectively. Cash generated from rental operations increased
principally because of the addition of new buildings.
Cash flow from investing activities
Net cash used in investing activities reflected in the statement of cash
flows for the nine months ended September 30, 1997 and 1996 increased $71.5
million, primarily because of an increase of $46.6 million in capital
expenditures and $15.9 million in joint venture contributions. As shown below,
the increase in capital expenditures is primarily due to higher development
activity in 1997. Additionally, during 1997 the Company contributed $11.2
million to a joint venture which acquired the 3,470 acre Talega Valley land
development project in San Clemente, California. The venture expects to develop
up to 4,965 residential lots in a master planned community.
Capital expenditures reflected in the statement of cash flows as investing
activities represent expenditures for projects the Company intends to hold for
its own account and included the following (in millions):
16
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1997 1996
-------- --------
<S> <C> <C>
Construction and building improvements... $56.3 $27.0
Property acquisitions.................... 14.4 12.3
Predevelopment........................... 10.4 5.0
Infrastructure and other................. 10.0 2.8
Capitalized interest and property taxes.. 3.7 1.1
----- -----
$94.8 $48.2
===== =====
</TABLE>
Construction and building improvements - relates primarily to
development of new industrial properties held for lease and improvements to
existing buildings. Industrial development activity is summarized below (in
square feet):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1997 1996 1997 1996
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Construction and completion
Under construction, beginning of period.. 1,786,200 1,562,636 2,286,961 641,128
Construction starts...................... 906,000 689,200 1,252,000* 1,812,308
Completion............................... (881,200) (784,925) (1,727,961) (986,525)
---------- --------- ---------- ---------
Under construction, end of period........ 1,811,000* 1,466,911 1,811,000* 1,466,911
========== ========= ========== =========
</TABLE>
* Includes 626,000 square feet of "design build" development for third party
land owners
As of September 30, 1997, the Company had 1.8 million square feet under
construction, of which approximately 905,000 square feet is expected to be
completed by year-end. Of the 1.8 million square feet under construction, 1.2
million square feet will be added to the Company's portfolio.
Property acquisitions - during the second quarter of 1997, the Company
began the process of actively identifying and acquiring development sites beyond
its historical land holdings. Following is a summary of the more significant
1997 acquisitions related to industrial development activities:
. In September 1997, the Company acquired 294 acres of land in Denver, Colorado
for $9.25 million: plans call for development of warehouse/distribution
space.
. In September 1997, the Company acquired 27.3 acres of land in Oakland,
California for $5.1 million: plans call for development of light industrial
and warehouse/distribution space.
Predevelopment--relates to amounts incurred in obtaining entitlements for
the Company's major mixed-use projects. The increase for the nine months ended
September 30, 1997 compared to the same period in 1996 primarily relates to
activity at the Mission Bay and Pacific Commons projects.
Infrastructure and other--primarily represents infrastructure costs
incurred in connection with the Company's major mixed-use and development
projects. The increase for the nine months ended September 30, 1997 compared to
the same period in 1996 primarily relates to the Pacific Commons and Woodridge,
Illinois projects.
Capitalized interest and property taxes--represents construction period
interest and property taxes capitalized to the Company's development projects.
17
<PAGE>
Cash flow from financing activities
Net cash provided by financing activities reflected in the statement of
cash flows increased by $100.8 million for the first nine months of 1997
compared to the same period in 1996. This increase is primarily because of a
$63.2 million increase in net borrowings used to finance development projects
and a $38.3 million decrease in preferred stock dividends and costs of preferred
stock redemptions in the first nine months of 1997 as compared to the same
period in 1996.
As of September 30, 1997, the Company had total outstanding debt of $563.6
million, of which 61.9% was non-recourse to the Company and secured by certain
property of the Company, 37.7% was recourse to the Company and also secured by
certain property, and 0.4% was unsecured. During the next twelve months,
approximately $36 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
As of September 30, 1997, the Company had approximately $26.9 million in
total commitments for capital expenditures. These commitments are primarily to
fund the construction of industrial development projects, predevelopment costs
and re-leasing costs.
Cash balances, available borrowings and capital resources
As of September 30, 1997, the Company had $17.3 million in cash and cash
equivalents, including $2.2 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 September 1997,
the Company modified its secured revolving credit line to increase the maximum
commitment from $240 million to $265 million. At September 30, 1997, the
Company had available $75.7 million under its modified secured revolving credit
facility, $1.9 million under its development construction facility, $11.9
million under its residential construction facilities, and $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. The Company currently estimates the debt
requirements relating to its planned development activities will exceed the
current commitment under existing debt facilities. The Company believes it will
be able to obtain the additional required debt capacity to complete its planned
development activities.
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. Costs incurred in connection with operating properties and properties
previously sold are expensed. As of
18
<PAGE>
September 30, 1997, management has provided a reserve of $12.9 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. Environmental
costs relating to undeveloped properties are capitalized as part of development
costs. At September 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 $38.4 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 during the
nine-month period ended September 30, 1997 totaled $3.6 million. For the years
ended December 31, 1995 and 1996, the Company capitalized $1.7 million and $2.8
million of such costs.
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
position, results of operations or cash flows.
RISK FACTORS
This quarterly report on Form 10-Q contains 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) the ability to
recruit and retain or replace key personnel (vi) land and building material
costs, (vii) the availability and cost of project financing, (viii) competition
from other property owners, (ix) liability for environmental remediation at the
Company's properties, (x) the Company's ability to increase development fees,
(xi) the Company's ability to sell non-strategic assets, (xii) changes in the
capital markets affecting the ability of the Company to minimize its interest
and preferred dividends, (xiii) the Company's ability to control the timing of
the recognition of deferred tax liability, (xiv) the impact of discretionary
government actions, (xv) the exposure of the Company's assets to natural
occurrences, such as earthquakes, tornadoes, and similar events, (xvi) changes
in the legal and regulatory environment, including the tax treatment of the
Company's activities and assets, and (xvii) risks related to the performance,
interests and financial strength of the Company's joint venture partners.
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 filings with the 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 8 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.
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit No. 27 Financial Data Schedule
20
<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: October 31, 1997 By: /s/ Stephen P. Wallace
--------------------------- ------------------------------
Stephen P. Wallace
Senior Vice President and
Chief Financial Officer
Date: October 31, 1997 By: /s/ Paul A. Lockie
--------------------------- -----------------------------
Paul A. Lockie
Vice President and Controller
21
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(Article 5 of Regulation S-X)
22
<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 STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 15,133
<SECURITIES> 0
<RECEIVABLES> 35,738
<ALLOWANCES> 2,090
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,335,742
<DEPRECIATION> 228,970
<TOTAL-ASSETS> 1,206,261
<CURRENT-LIABILITIES> 0
<BONDS> 563,641
0
0
<COMMON> 1,065
<OTHER-SE> 440,843
<TOTAL-LIABILITY-AND-EQUITY> 1,206,261
<SALES> 67,374
<TOTAL-REVENUES> 178,477
<CGS> 55,740
<TOTAL-COSTS> 119,644
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 254
<INTEREST-EXPENSE> 30,034
<INCOME-PRETAX> 28,799
<INCOME-TAX> 11,727
<INCOME-CONTINUING> 17,072
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,072
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
